What are peas in a bag?

<>

When it comes to investing in the stock market, there are different quality values, some of which are cumbersome for investors. Chicharros are those with a low level of capitalization, low liquidity and implicit speculation.

They could be considered as a subsector within the stock market, with well-defined peculiarities that make them difficult to identify by savers.

For some a possibility, even if an inordinate risk and lack of sanity for others.

Charm for speculators and in general a phenomenon with opportunities for debate in specific situations, even when most experts have similar opinions.

Trading peas can be complex due to the high risk involved. Even so, there are investors who like to move at this level, being attractive to them.

Being able to have spectacular increases and pass from hand to hand due to the price instability that they can experience in a short time; If they end up in our possession and are not sold at the right time, or if their value falls too low, the damage could be considerable.

There are opinions and rationales against, but equally in favor on the part of critics about these values, causing debate.

Revisaremos en este post características y algunos ítems interesantes de este event en Bolsa.

Chicharros on the Stock Market - Definition

They are values with the opportunity to be easily identified. Pequeñas compañías que cotizan en bolsa, que disponen una liquidez tan baja que son el target de intermediarios financieros y especuladores que tendrán una influencia significativa en su cotización.

This is exactly why its evolution is so violent in these markets. Its price volatility is marked above the ordinary., being able to revalue a 15%, but despite this falling devastatingly even above this percentage.

It is a security whose capitalization level is markedly low and includes excessive risk. They suffer very high fluctuations in their price and therefore will be the object of speculation, easy to manipulate.

They are small or medium-sized companies that, because they have little negotiation, tend to suffer significant stock market variations, some of which have an intense journey on the stock market because they are small and associated with new sectors with significant growth potential. Also to skip suspension of payments scenarios or improve your income statement. The positive increase in analyst expectations also influences this fact.

It is a type of operation that we could qualify as not recommended for conservative investors, but for those with aggressive profiles.

They are disparagingly known as chicharros, by analogy to the cheap, low-quality fish that bears this name. Companies that often deserve this name, being involved in continuous economic problems that make their accounts unstable, reflected in the price of their shares.

A large company with a low-quality business will not be considered a pea, and a small company with a profitable business will not be either.

These types of securities can have majestic rises and intensely multiply their price in a short time. They could also be falling for long periods, such as decades.

It is feasible to be in a pea for a few months and get to multiply the money 10 times, but you could stay in it for 30 years and lose money substantially.

It is exactly the opportunity or possibility of succeeding in achieving extraordinary returns in a short time, which attracts many.

The most rational action is certainly to avoid temptation. Many claim that you could be getting a raise, but more money is likely to be lost on subsequent failed attempts.

It is suggested that even in cases where prices could rise sharply, it is difficult to win, since they could fall as fast or more than they climbed; causing investors who have bought lower to see them rise without trading, in the hope that they will continue to do so, suddenly attacking the fact that they have returned to the price they bought, and not infrequently below.

Many feel that the smartest thing to do is stay away from peas and avoid them.

Chicharrillos

Considered a section of peas, they have an implicit risk even more accentuated. They could be considered very "illiquid", even going out of business, being very dangerous for investors.

They are more volatile than the peas themselves. In a few months, they are capable of multiplying their market capitalization by 10 or 15. For all this, they are usually managed by strongly aggressive investors or who are continuously aware of market developments.

A poorly managed company is not always a Chicharro

There are small cap companies and they are not exactly a pea contemplated. They can be considered a profitable business to the point that those who invest in them could be making a desirable investment, especially if they were to grow or be overshadowed by a superior company in the future.

Even though the chicharros are small-cap companies, they are still poorly managed companies with significant financial problems.

Due to the fact that a company is being mismanaged, this will not turn it into a pea. If it has a high enough market capitalization, it will not be considered as such.

It is necessary that both characteristics or circumstances coincide. In other words, introduce yourself a low capitalization and to have major financial problems.

Identifying characteristics

Finally and synthesis, we detail some characteristics that will help to identify this type of value.

• They will be small companies, regularly with few trips.
• The variations in their prices are overwhelming.
• They have low capitalization and their liquidity is lower than the other securities listed on the Continuous Market.
• Companies in recession could be considered within this classification.
• Its volatility is exaggerated, with a high price range due to its low trading volume.
• Its price can move with oscillations from 10 to 15%.
• Low rotation and narrow values.
• They belong to companies with a delicate financial situation.

Good for investing or speculating?

Speculating on peas may be profitable, even though it is not recommended. In the cases of those investment houses that can move these values with tiny amounts of money, it would be even less advisable.

These are values with the opportunity to be easily manipulated. And this question could be pointed out as another of its identifying characteristics. With few orders and money, it is feasible to artificially move the price.

It is suggested that these values are not truly suitable for investment, rather ideal for speculating and this if the investor has enough experience to recognize their profit and loss limits.

Inexperienced investors trapped

An experienced investor speculating on peas will always bear in mind that “today” a specific trade could be super profitable; but that "tomorrow" everything could be lost.

Many investors with limited experience will find themselves trapped in losses, as they are lured by promises of quick profits.. They generally focus on potential profits and do not adequately reflect the losses they may incur.

Let's imagine a company that at a certain moment is trading at 0.04 euros. If the price returns to 0.08 euros, we will be doubling the bet, thinking that it is only 4 cents without much importance. Since it is difficult to place a stop loss with such low prices, investors without sufficient experience or knowledge stop placing such a stop.

By remaining trapped in losses, it will cease to be a speculative operation in itself and will become a long-term investment.

The error begins to multiply exponentially, since these values could be falling for years when entering a loss dynamic like that, they could not even recover their original price.

For many, speculating with peas is like playing the lottery, even more than an act of speculation in itself.

The peas are values in which those very aggressive investors delight, not so the conservatives who very seldom will lean towards this type of investment due to the existing insecurity, aware that they can have significant losses in a few trading sessions.

Investors with a lot of experience are the ones who could take advantage of this type of securities, even when it is necessary to make it clear that it consists of a risky activity.

It is necessary to buy and market in a hurry at the moment when there is an upward trend, otherwise you will have to maintain a value that will not be worth what you paid for it.

If peas are managed incorrectly, they can become a real ruin, even though as with all risks, the probability of success will always be present.

If a company rises sharply and subsequently falls at the same rate, including going out of business, how could it happen; in that case, it is feasible to be trapped in value until the company proceeds with the appropriate measures and decisions to recapitalize or market to a third party.

Even though peas could appreciate strongly, even though there are greater opportunities to make a profit than with "Blue Chips," there is no doubt that it will be a risky game.