Have you ever heard the terms tier one stock, tier two stock and tier three stock? In the media, your broker may often recommend trading in first-tier stocks, and avoiding third-tier stocks. Everyone's assessment of the first, second or third tier stocks may be different. However, at least you should know which ones are included in the first, second and third tier stocks.
Tier one stocks are stocks that have a large market capitalization value, are generally market leaders in their industry, and have good performance in their industry. The way to find out the value of a company's market capitalization is to multiply the number of shares outstanding (listed share) by the share price. Also read: How to Get Data on the Number of Outstanding Shares and Market Capitalization.
For simplicity's sake, tier one stocks are blue chip stocks. LQ45 shares are not necessarily first-tier stocks. Some of the shares of LQ45, are included in the second-tier shares. According to my version, the blue chip stocks are TLKM, BBCA, ICBP, BBNI, BBRI, INDF, UNVR, GGRM. First-tier stocks have meaning as market-moving stocks / JCI movers.
It is said to be driving the JCI because these shares have a large market capitalization value. Thus, these first-tier stocks could "drive" the JCI movement. If the blue chip stocks (first-tier stocks) increase or decrease by just a few points, it will have a major effect on the JCI movement. Of course, tier one stocks are liquid stocks, and all blue chip stocks as far as I have observed are always included in the LQ45 index.
What you need to know about this first-tier stock is that the volatility of the stock price is not too high. This means that the rise and fall of first-tier stocks tends to be more stable. That is why brokers, stock analysts often recommend buying safe stocks, namely by buying first-tier stocks.
The second tier stocks are liquid stocks, the performance is still stable, but the market capitalization is not as big as the first tier stocks. Second-tier stocks are stocks with a fairly high level of volatility, but price increases and decreases are still fairly stable. My version of the second-tier stocks include: BSDE, CPIN, PPRO, PWON, ASRI, LSIP, JPFA.
Meanwhile, third-tier stocks are stocks with very small market capitalization, illiquid stock prices, stock prices tend to be low (below 400), and stock price volatility is very high. The rise and fall of third-tier stocks can occur very quickly.
The performance of the third-tier stock companies does not reflect good fundamental performance. Not a few of these companies are problematic companies (late submission of financial reports, troubled directors, too large debt and others2). Due to its poor fundamental performance, its share price is also illiquid and is not a target for investors.
As a result, these stocks are often fried by the dealer. This is what causes the volatility of third-tier stocks to be higher, and the stock price is very difficult to predict using technical analysis (how to guess using technical, there are no charts).
In other words, third-tier stocks are fried stocks/junk stocks/junk stocks. If you look at stocks that are "cheap" in price, suddenly rising 18% a day without any news, or going up fast just because of rumours, that's one of the characteristics of a third-tier stock. Examples of third-tier stocks according to my version are DEWA, ENRG, UNSP, TRAM, BEKS, BNBR, CNKO, AKKU. Read also: Studying Bandarmology: ENRG Stock Accumulation.
"Mr. Heze, which one is the best to trade? First, second, or third-tier stocks?" Ask you
All of the choices depend on you and market conditions. When the first tier stocks have gone up high and it is difficult to rise again, it is usually the second tier stocks that show off. On the other hand, if the first-tier stocks are in correction, don't waste your time picking up the first-tier stocks at lower prices.
When first-tier stocks have corrected quite a lot, usually these stocks always rebound quickly. For third-tier stocks, I always advise you to avoid them. Also read: Beginners, Avoid Fried Stocks. Even if you want to play in fried stocks, trade with small lots. Also read: Trading Strategies in Fried Stocks.
