How do you get an edge in today’s market? What market is the best bang for your buck? Lou Basenese believes you can find your edge in micro-caps. But what do you buy? How do you find opportunities? And when should you buy them? In this episode of How To Trade It, Lou lays out his strategy + shares an upcoming program launch you don’t want to miss. Check it out!WHY does @LouBasenese believe you should leverage micro-caps? Find out in this episode of How To Trade It! #Stocks #Stock #Trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet
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You’ll want to hear this episode if you are interested in…
- [0:53] Lou’s background in trading
- [1:41] How to get an edge in today’s markets
- [4:04] Look for a catalyst on the horizon
- [6:50] Lou’s asset allocation embraces micro-cap stocks
- [8:37] Finding opportunities in crisis
- [14:26] The Microcap Advantage
- [18:42] How to find catalysts in the market
- [20:07] Lou’s advice for the skeptics
- [22:31] Lou’s risk-management strategy
- [24:49] How to take advantage of a great opportunity
How to get an edge in today’s markets
Firstly, Lou points out that you should go where you know. Ask yourself, where is your background, knowledge, and experience? Look there first. You can see what no one else can when you leverage your experience. Lou sees that translate into profits in the market—often. Lou had a science background, so he stuck to biotech investing at the beginning of his career. Check out our trading rules to successful profits guide.
Secondly, there has to be something on the horizon that will move shares: a product launch, a new contract with a customer, earnings report—anything that puts interest and visibility on that stock. There needs to be a catalyst at hand before you buy in so that you aren’t sitting there losing out on other opportunities. So Lou looks for catalysts within 30–45 days of entering the position and another catalyst that follows closely after. Identifying your preferred trading timeframes will also be very important.
Lou tries to make tax-efficient plans, so of course, it would be ideal to hold everything for 366 days. But the reality is that things move quickly. If the catalyst comes to fruition and the stock moves, it becomes time to take some profit off the table. If the position has doubled, he takes his initial capital off the table and lets the winnings ride. He’ll hold it for as long as it lasts. Once he’s up a certain percentage he’ll put on a 25% trailing stop and let it play out.
You can find opportunities amidst crisis
Most people in the market freaked when the pandemic hit, but Lou didn’t. After massive events in the market, there comes investing opportunities. Everyone focuses on the sell-off. But then they have to decide when to come back in—but a snapback rally tends to happen fairly quickly. Lou believes if you can look past the fear, you can take advantage of the massive rallies that happen in the moment. If you learn how to control your emotions and use it to your advantage you can succeed.
What if things don’t recover? How do you protect yourself? Lou says to invest in what you know and in businesses that won’t go away whatever the macro-event is. What are companies that you can put money into that won’t be impacted by the market? There isn’t a hard and fast rule. It’s situational. What trends will all persist? Listen to hear Lou’s take, and check out our guide on how to trade stocks in a recession.How do you get an edge in today’s markets? @LouBasenese shares his personal strategies in this episode of How To Trade It. Don’t miss it! #Stocks #Stock #Trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet
Embrace the edge: allocate room for micro-cap stocks
Lou believes you don’t have an edge unless you’re investing in micro-cap stocks. Everything else can be “set it and forget it.” He allocates 60–70% to low-cost ETFs and the other 30–40% he puts in risky or speculative investments. He’s found that over time that’s a manageable amount. He’s probably in 10 positions at any given time. Anything more than that and you water down your returns. Learn how to trade ETFs today!
Lou invests in everything that he writes about. If you do the digging and invest time in research, you can get an edge. The new research product he’s about to launch focuses on undervalued, undiscovered, micro-cap stocks that have an upcoming catalyst that is levered to a large trend in the market.
You also have to find opportunities while they’re still small. The first fingerprint reader on the iPhone? He recommended that investment at $2 a share and Apple bought them out at $8 a share. Lou notes that even a 2–3% allocation to micro-caps can meaningfully impact your bottom line and your net worth. They have larger consistent gains over time. How do you find catalysts in the market? Listen to hear one of Lou’s unique strategies.
Lou’s advice for the skeptics: stay skeptical
There are a lot of bad actors out there. You can easily weed out a lot of the junk by focusing on what trades on a major exchange (i.e. NASDAQ or NYSE). Secondly, read the fine print in the research. If they’re paying for visibility, it’s a potential pump and dump and doesn’t smell right. “Every big company started out as a small company. So for every large cap that’s available, at one point in time they were a major-listed NASDAQ stock that was trading for a low price and a low market cap.”
Mark your calendar for October 14th: Rob Booker and Lou host Back to Your Financial Future. They show YOU how to start with small stakes ($500) and turn into over $1 million buying micro-caps. Check it out!Why should you allocate room for micro-cap stocks in your portfolio? @LouBasenese has a few reasons. Learn more in this episode of How To Trade It to learn more! #Stocks #Stock #Trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet
Resources & People Mentioned
Connect with Lou Basenese
- October 14th: Back to Your Financial Future
- The Micro-cap Advantage
- Disruptive Tech Research
- Follow Lou on Twitter
- Connect on LinkedIn
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