How to buy Illiquid Small Cap Shares

Recently I have been buying Small Cap shares, often fairly illiquid and have found it difficult to place an order of a reasonable size. Sometimes it isn’t possible to directly place a trade worth a couple of thousand pounds without phoning a dealer.

I have found that when I did call a dealer I was offered the stock at a poor price, and resolved to place limit orders instead.

Paulypilot over at the fool today posted some tips on how not to overpay, it’s definitely a must read and would apply to both UK and US stock exchanges.

The main points I have taken out of it are:

1. Buy the stock on down days as there is more of it about and you can deal in reasonable size.
2. Don’t continually buy shares on consecutive days (to build up your position) as you end up raising the price of the stock and chasing the price up, he recommends only placing a couple of orders a week and the repeat buying won’t be detected and you won’t end up getting shafted.

Excellent information as usual from Paulypilot.