Market cap = share price x total shares outstanding. It's the total market value of a company. Market cap determines which index a stock belongs to, how much volatility to expect, and the type of investor it attracts.
Mega cap (> $200B): Apple, Microsoft, NVDA. Most stable.
Large cap ($10B-$200B): established companies, index members.
Mid cap ($2B-$10B): growing companies, more volatile than large.
Small cap ($300M-$2B): high growth potential, high risk.
Micro cap (< $300M): speculative, often illiquid, very volatile.
Small caps move faster but are riskier -- institutional money avoids them.
Large caps have tighter bid-ask spreads and better liquidity.
Index inclusion forces passive funds to buy -- huge demand event.
A stock growing into the next cap tier is a powerful long-term catalyst.
Related: Bull Market vs Bear Market • P/E Ratio -- Price-to-Earnings