Dingdongler

Hi,

I'm about to buy some shares in a company. Its a strange one, its listed on AIM and seems very illiquid if that makes sense. 85% of the shares are held by the owner/CEO and often days go by and nobody buys or sells shares in it.

Now the only reason I'm buying shares in it are because the CEO started up a company before and over a number of years the shares went up 10 fold. I had shares in this company because they were given to my wife who used to work for this company.

What I'm trying to say is that I'm buying shares based on the man who runs it. I am going in with my eyes wide open and know its a punt and will accept any money I lose.

Since I know very little about share trading could somebody give me a strategy? I want to keep invested in the shares over at least a year or two because that's how long it will take him to work his magic if he is going to.

Is it still wise to have a stop loss and then buy back in again when it drops? What if I set the stop less at say 10% drop then after my shares are sold it bounces back before I can buy back in? Then I'll have made a bigger loss.

The share is in pennies and sometimes it has gone up or down 30% in one day.

I hope my question makes sense.

Thanks

Coffin Dodger

Buy low, sell high

GlesgaKiss

As you say, there isn't really much point in a 10% stop loss with these illiquid stocks. You might as well either just take a punt with money you're totally prepared to lose for the possibility of high reward(which sounds the case anyway), or get clued up on the sector and do some in-depth research into the company. But if you have faith in this guy and just see it as a punt buying shares in a company he's just started running, you might as well just go for it.

You seem to have answered your own question by what you've said about it moving around by 30%.

ScoTTyB

Throw the money in and forget about it. You'd probably still loose money even if it did move up 30% and you sold due to the spread with penny shares.

This is definitely hold for a 5 or 10 x profit or don't bother.

Dingdongler

Thanks guys that's what I wanted to hear.

Scotty, is the spread really that big? I haven't tried to buy any yet but on my share dealing acct it shows a 'bid' and 'ask' price and the difference is about 7%, will that be the real spread when I come to buy/sell?


Thanks.

Chip

I would have thought you could find out the spread on the finance sites where it is usually quoted.

Chip