Every Monday (unless the markets are closed), we plan to tweet our algorithm’s top microcap stock picks for the week. The week after, you’ll want to look at Monday’s new picks and sell the old picks that are no longer in the list.
See the microcap picks on Twitter. (This is not investment advice, read disclaimer.)
Recommended brokerage:
Place trades with Webull (commission-free, extended hours trading, commonly gives free stocks to those that join–click here to see if they offer it today, affiliate link).
How to buy:
Easy way: Before 9:30, do a limit order at current or last close price.
Harder way (but may get better fills/prices): Place limit orders at -0.5% of the price. Don’t do a limit order over “Ask” price on first attempt. If the order doesn’t go through within 30 minutes, try placing the limit order at “last price.” Otherwise, you may want to try 1-10 cents over “Ask” price.
How to sell:
Easy way: Before 9:30, do a limit order at current or last close price.
Harder way (but may get better fills/prices): Place limit orders at +0.5% of the price. Don’t do a limit order under “Bid” price on first attempt. If the order doesn’t go through within 30 minutes, try placing the limit order at “last price.” Otherwise, you may want to try 1-10 cents under “Bid” price.
The rebalancing goal:
Once per week, you want to attempt to be have 10% equity in each stock. Because there’s a slight cost to trading (slippage), having some stocks at 8 to 12% is fine.
Commonly asked questions
Why are the picks weekly? We’ve backtested rebalancing daily, every 2 weeks, and many other time segments. The returns were highest when rebalancing weekly.
What if I’m concerned about losses? Our backtest did not use stop losses, but stop losses are an option for those concerned about risk. Typically, a -20% stop-loss order will allow you to recuperate slightly under 80% of your original investment.
Why don’t you post breakout, pullback, oscillator, etc. charts? The algorithm doesn’t use oscillators. Many swing traders use RSI, Ultimate, etc., but it’s more challenging to swing micro caps. Good, healthy, and growing financials are our main indicators and finding the right week to close a position.
When is the best time to place the orders? First hour the market opens and the last hour of the market because most of the trading activity happens at those time and your stocks are more liquid during those times. For example, Mondays at 9:30-10:30 am and 3-4 pm.
Why is Monday’s list limited to 10 stocks? It’s easy to balance each stock at 10%. The math is simple, but more importantly, it’s fairly diversified. Joel Greenblatt, a value investor known for his 50% annual returns, stated: “risk is supposedly reduced by 72% with a four-stock portfolio [instead of owning only one stock], by 81% with eight stocks, 93% with 16 stocks…” Therefore, 10 stocks gives reasonable diversification and it’s easy to manage.
Why is this free? The plan is to always keep this free, but at some point there is a plan to have a premium service. Additionally, I believe that savers that decide to invest should be rewarded. You decided to put your money to work and serve companies that make responsible financial decisions.