How to make big money from Midcap Stocks in the short term can be a challenging endeavour, as these stocks can be volatile and subject to quick fluctuations. However, there are several examples that Midcap Stocks have extra potential to earn big money in the short term too. One can focus on Nifty Midcap Stocks 150 Index to identify quality & growth stocks. Identifying quality mid-cap stocks requires a combination of fundamental and technical analysis.
Identify the Market Trend :
A market trend refers to the overall direction in which a particular financial market or asset is moving. Before taking entry into your selected stocks, it’s essential to identify the market trend, whether it is bullish, bearish, or sideways. You should do proper analysis of the market trend, using various factors such as technical and economic indicators , geopolitical events and supply and demand.
Fundamentally Strong Midcap Stocks :
Always select strong fundamental midcap stocks having steady & consistent growth in the company’s revenue growth, earnings growth, profitability, and cash flow. Best midcap stocks are those stocks that have good financial ratios such as ROE (Return on equity) and Return on Capital Employed (ROCE) above 18 at least, Debt to equity less than 1 etc.
Undervalued Midcap Stocks :
The selected stock should be an undervalued midcap stock compared to its peers. Look at the price-to-earnings (P/E) ratio and also compare it with industry’s P/E ratio, check also price-to-sales (P/S) ratio, and other valuation metrics to identify the valuation of any stock.
Insider Ownership / Big Investors Presence :
Identifying insider ownership or big investors’ presence in any stock is not easy. Because they may not always disclose their complete holdings publicly. However, there are several ways to identify their presence like screener.in to check increase in holdings of FIIS(Foreign Institutional Investors) and DIIS(Domestic Institutional Investors). You can check in below image.
You can also check the trading volume of the stock to identify smart investors presence in the stock. if there is a sudden increase in volume, this may indicate the presence of institutional investors or hedge funds who are buying or selling large quantities of the stock. Always prefer recently accumulated mid-cap stocks by FIIS and DIIS. Keep in mind that identifying big investors’ presence in a stock is not a guarantee of success, and it is important to conduct your own research before making any investment decisions.
Make a Trading Plan:
You should make a trading plan that includes your entry and exit points, stop-loss orders, and profit targets. You should also consider your risk tolerance and position sizing to ensure that you manage your risk effectively.
Set Price Targets :
Always set price targets that can help you determine when to buy or sell mid-cap stocks. You can set a target price for buying a stock and another target price for booking profits. If you like you can also start SIP (Systematic investment plan) in the stock.
Use Stoploss Orders :
Stop-loss orders can help you limit your losses if a stock’s price moves against your expectations. This approach involves setting a price at which you will automatically sell the stock to minimize your losses.
Risk Management Rules :
Always focus that your profits should be bigger than your risk (stop loss) taken.
Invest in High-Potential Sectors :
Investing in sectors that have the potential for growth and also have technically strong stocks that are ready to deliver short-term gains. For instance, mid-cap technology stocks may have high growth potential due to the rapid pace of technological innovation.
Focus On Latest News and Events :
News & events always have an important impact on the stock market, particularly with mid-cap stocks. Be always up to date with the latest news & events so that you can identify short-term opportunities for making a decent return.
Conclusion :
Remember one thing that short-term trading involves a higher level of risk than long-term investing. But your unique method of Midcap Stock Selection and strict follow of discipline with money management can give you a bigger return also in the short term.