September 20, 2019 Alex

What is Market Capitalization?

Market Cap (short for Market Capitalization) denotes the total value of a company's shares in the public market.

It is found by multiplying the current market price per share by the total outstanding shares. This an important metric, which can be found on any financial quoting site, and displays to traders and market participants the size of a company. Along with categories such as Price, and Sector, Market Cap provides another umbrella for investors and traders to narrow down a niche.

Market Capitalization Breakdown: 

  • Nano-Cap: Market Cap under 50 Million (Ex. MTSL)
  • Micro-Cap: Market Cap between 50 Million and 300 Million (Ex. TTOO)
  • Small-Cap: Market Cap between 300 Million and 2 Billion (Ex. ACHN)
  • Mid-Cap: Market Cap between 2 Billion and 10 Billion (Ex. ACB)
  • Large-Cap: Market Cap between 10 Billion and 200 Billion (Ex. MU)
  • Mega-Cap: Market Cap above 200 Billion (Ex. AAPL)

Market Cap Considerations

The higher in market cap you go, the more legitimate the company is and therefore the less risky the investment becomes. On the other side of that, the lower the market cap (typically consolidated within the Nano/Micro-Cap region) the riskier the investment is. The main factors that impact market capitalization are the issuance or removal of shares and changes to the price per share of the stock (As this would impact the sole two values that go into its calculation).

As active traders, it is important to keep in mind our only focus is to find ways to profit off of price action in which we have edge, whether it be in low or high market cap stocks, the question becomes where do you personally have the most edge in trading. There are no right or wrong stocks. There are only stocks that match your criteria to trade and those that do not. Market cap may just be one way to narrow down your focus, cut out noise, and find a niche in the market to best focus your efforts towards.

market capitalization

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