The Microcap stock (also micro-cap) refers to the stock of public companies in the United States which have a market capitalization of roughly $50 million to $300 million. The shares of companies with a market capitalization of less than $50 million are typically referred to as nano-cap stocks.
Micro-cap : $50 million-$300 million.
Nano-cap: Under $50 million
Microcap classification of a stock has nothing to do with its share price. It's possible for a large-cap stock to trade for under $5 per share, just as it's possible for a microcap stock to trade for several hundred dollars per share.
Instead, the classification is based on market capitalization, which is the entire market value of a company's outstanding shares. The market capitalization is typically included in most stock quotes and can be calculated by multiplying a company's number of outstanding shares by its current share price.
A company's market capitalization fluctuates constantly because it's based on the current share price.
To be candid, microcap stocks are riskier and less stable than stocks of larger companies. Since there is generally less information available on microcap listed on pinksheets and OTCBB, our focus will only be on the ones listed on nasdaq and NYSE. For traders with less capital with no knowledge of options, trading micro-cap can be highly rewarding. A microcap stock can easily move 100% in a day. This is not possible for large-cap. The only way to make 100% profit on a large cap stock is through options.
With risks come high rewards. Stop loss must be used always for microcap trades.
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