One of my biggest mistakes.

Good morning again,


I'm writing this with one eye on a live graph on my other monitor, so I apologise in advance for any awful spelling, punctuation and or grammar issues.


Probably the worst trade to date that I have ever made was in a company called Armadale Capital. Without going into excessive detail, they invest in other companies within the natural resources sectors, such as Mine Restoration Investments in South Africa along with a few others.


My mistake here was failing to do a full check on the board of directors and also forgetting that the sector is very slow to evolve. It's because of this that I've added to my trading rules the following line: "Do not invest in the natural resources sector - it will take you an age to get your money back".


My failings to profitably trade this company doesn't mean that the company is bad. In fact, it has many aspects that I think are great: the low cost Mpokoto Gold Project in the Democratic Republic of Congo and the low cost fine processing and recycling plant that's a branch of Mine Restoration Investments. I made the mistake of thinking that some quick number crunching from me and a realisation of a distinct difference between the value and price after doing this would make the share price soar.


The share price didn't soar - in fact it fell almost 35% and I closed out that position with a hefty loss (for a nineteen year old).


I think that for me what caused the downwards pressure in the share price was that the Board of Directors had a tendency to release "media updates" that in hindsight were effectively unable to tell shareholders anything new. This combines with their very high salaries gave the impression to shareholders that they weren't pulling their weight properly. I felt like even more of a tit after this trade because I had been given a warning about the board of directors before - albeit on an internet forum.


I learnt a lot from this position:


1. Look for proof of a good consistent board of directors - emailing them first about something arbitrary and seeing if they reply is often a good indicator.


2. Natural resources are a slow evolving area and you'll find it hard to make profits actively trading these companies (although doubtless many people do).


Good luck trading,

The Masked AIM Trader

Why I Trade Small Caps.

Good morning,

One of the questions people tend to ask me is why I am currently so focussed on the UK small caps. It's not fair to say that I don't trade medium and large cap companies as well, but my biggest successes have come from investing in companies that have very low market capitalisations.

My reasoning behind this is that smaller companies are overlooked much more often than larger companies. This could be simply due to the restrictions on many funds from investing in on the AIM and exposing themselves to the smaller companies that float there, but it also comes down to other factors relating to liquidity (the ease of buying and selling a security) and position weighting within the fund.

It's therefore clear that as private investors we are able to take advantage of this anomalous area where the professionals don't take as much interest. I have found that my stock picks that were the most successful within this area were those picked based on support lines and fifty-two week lows within stocks that are sub penny shares with market capitalisations between five and eight million pounds.

This isn't to say that I haven't made mistakes; I have made many. In fact, I'm going to write about my biggest mistakes in separate posts. Nevertheless, my best trades have always been within these small cap companies and my biggest mistakes have always been when I break my own rules and or move out of this market capitalisation zone.

Now, just because this has worked for me, doesn't mean that it will be a good strategy for everyone to employ and I implore you to do your own research and test the waters perhaps with a demo trading account to decide if you are more of a short term or long term holder.