Lou Basenese: Why Should You Leverage Micro-caps? Ep #30

15 Price Action Patterns Insiders are Using If a hedge fund managers were using 15 specific price action patterns would you want to know?

Lou Basenese

How do you get an edge in todayโ€™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 donโ€™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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Youโ€™ll want to hear this episode if you are interested inโ€ฆ

  • [0:53] Louโ€™s background in trading
  • [1:41] How to get an edge in todayโ€™s markets
  • [4:04] Look for a catalyst on the horizon
  • [6:50] Louโ€™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] Louโ€™s advice for the skeptics
  • [22:31] Louโ€™s risk-management strategy
  • [24:49] How to take advantage of a great opportunity

How to get an edge in todayโ€™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 marketโ€”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 reportโ€”anything that puts interest and visibility on that stock. There needs to be a catalyst at hand before you buy in so that you arenโ€™t sitting there losing out on other opportunities. So Lou looks for catalysts within 30โ€“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. Heโ€™ll hold it for as long as it lasts. Once heโ€™s up a certain percentage heโ€™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 didnโ€™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 inโ€”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 donโ€™t recover? How do you protect yourself? Lou says to invest in what you know and in businesses that wonโ€™t go away whatever the macro-event is. What are companies that you can put money into that wonโ€™t be impacted by the market? There isnโ€™t a hard and fast rule. Itโ€™s situational. What trends will all persist? Listen to hear Louโ€™s take, and check out our guide on how to trade stocks in a recession.

How do you get an edge in todayโ€™s markets? @LouBasenese shares his personal strategies in this episode of How To Trade It. Donโ€™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 donโ€™t have an edge unless youโ€™re investing in micro-cap stocks. Everything else can be โ€œset it and forget it.โ€ He allocates 60โ€“70% to low-cost ETFs and the other 30โ€“40% he puts in risky or speculative investments. Heโ€™s found that over time thatโ€™s a manageable amount. Heโ€™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 heโ€™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 theyโ€™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 2โ€“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 Louโ€™s unique strategies.

Louโ€™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 theyโ€™re paying for visibility, itโ€™s a potential pump and dump and doesnโ€™t smell right. โ€œEvery big company started out as a small company. So for every large cap thatโ€™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.โ€

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

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15 Price Action Patterns Insiders are Using If a hedge fund managers were using 15 specific price action patterns would you want to know?

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