• Online Share Trading & Top Stocks - ASX Shares

Big, Medium or Small Caps?

Every year the list of companies on ASX changes. Companies are added, taken over, revert back to private ownership or go broke. It’s the latter that is of most concern and while usually it is companies at the smaller end of the market that suffer this fate, mid and large capitalisation stocks can also go broke. Over the last 12 months we’ve seen a variety of companies go out of business. The list includes an investment bank, property trusts, mining companies as well as stocks from other industries both big and small. So the size or the sector a stock operates in does not guarantee how a stock will perform.

Different payoffs: While it’s not unusual for a share to double in value over a year or two it’s usually small to mid-sized companies, not large caps that are capable of such moves. The catalyst might be a discovery, a major contract win or being acquired. So the potential for a bigger payoff than a big cap stock attracts investors to lesser known companies.

Your choice as to where you invest or trade will be influenced by a variety of factors. Size of the stock may be one of them but opportunities exist at all ends of the market

Charts, Broker Research, & Trading Rules

How people trade is a personal one. For chartists it’s all in the chart. That is every piece of information that can affect a stock is reflected in its price and therefore a study of the chart is all that matters. Study of charts is well entrenched with its origins dating back a hundred years. Today trading software comes with a variety of charting methodologies that can be overlayed the stock price.

Broker research is usually confined to the top 100 stocks on ASX. It looks at the fundamentals of the company, its markets and valuation. Like charting most trading software also comes with broker or fundamental analysis. And just as there are investors that use charts exclusively there are investors that prefer to read balance sheets or research as the basis for their decision making.

Putting it all together for many share traders means combining both charts & research with their own trading rules. Once again these are many and varied but include rules to do with money management, profit and loss targets, length of time one holds a stock to name a few.