More Opportunities for Lower Capital Based Traders
One thing that is a constant in the Financial Markets and especially in the Stock Market over the past few years is change. Everything about Technical Analysis is changing. It is often hard for Retail Traders who trade from home and Technical Traders who are Semi-Professional Traders making a high income from trading stocks, to keep up with all the changes.
The chart example below is a low priced stock, and often within the price range that beginners need to study or lower capital base traders prefer. The all-time high is around 41, so it is a super bargain at 6-7 for giant Buy Side Institutions using Dark Pools.
New Bottom Formations for Technical Traders and new Top Formations too, have been areas of Technical Analysis that have changed dramatically, due to the plethora of new order types for the professional side of the market. Not much has changed however for Retail Traders using Retail Brokers, because Retail Brokerages have commoditized everything.
Unfortunately for many new traders, they do not realize that there is a huge difference between “trading” aka entering an order in broker software, and Technical Analysis which provides superb entries and reliable exits.
Most Retail Traders simply use recommended stocks, so their Return on Investment yields are very low compared to what a Professional Trader or Semi-Professional Trader earns. There is definitely bias against under $10 stocks by many Retail Traders, but this is something to set aside.
The Securities and Exchange Commission pilot forward test program for “small cap” stocks of which many trade under $10, had the goal to increase liquidity for the giant Buy Side Institutions using Dark Pools who requested this study. The spreads were widened on the smaller cap stocks in this test and so there is more energy, more momentum, and thus more opportunities especially for traders who have limited capital resources.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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