Stock Trading
Mar. 28, 202322 min read

10 Cheap Stocks to Watch & 7 Rules for Trading Them in 2023 

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Written by Tim Bohen

Ever notice that the stocks with the biggest gains tend to be cheap, low-priced stocks?

That’s because these companies are so small it only takes a tiny amount of excitement to wake them up. That gets the stock price moving.

A lot of traders love to play these massive movers. So this post is here to help you navigate the murky waters at the lower end of the stock market.

Do yourself a favor … Before you jump in, learn some strategies. Make sure you know what you’re doing. Follow the advice you’re about to read. 

Let’s dig into 10 cheap stocks to watch in 2023 and rules you need to trade them!

What Is a Cheap Stock?

Ask 10 different traders what a cheap stock is and you’ll get 10 different answers.

Some will say it’s a stock trading at a lower value compared to its earnings — enough to make a young Warren Buffett drool. 

Others would say it’s a stock that’s fallen out of popularity … once loved but now despised by the market.

So how do I personally define a good cheap stock?

First, it’s a stock that’s priced under $10. The companies that trade under $10 are often new and small … These companies have the potential to increase significantly in value in a short amount of time.

Second, the best cheap stocks definitely have a reason they could jump up in price sometime soon…

That could be a great chart setup, like a breakout to all-time highs or a news catalyst bringing in a massive wave of buyers. Sometimes, it can be the growing hype around a stock on Twitter and chat forums.

If you’re looking for cheap stocks to buy, the lower end of the market can be a great place to search. Generally, when a stock is priced so low, Wall Street won’t cover it — that can mean less competition with big traders and hedge funds.

Instead, you’re usually competing with less sophisticated traders and investors at the lower end. Only, you’re smart enough to give yourself the benefit of education, right?

Cheap Stocks to Watch Right Now

I’m always looking for good cheap stocks.

Here are a few examples of some plays I’ll be watching over the next few weeks.

These aren’t necessarily the greatest stocks overall, but they all have something interesting going on. Notice that the first three are in the coronavirus sector, which is hot right now. When a sector’s hot, it’s more about the sector catalyst than the stock being great.

Without further ado, here they are…

NanoViricides Inc. (AMEX: NNVC)

NanoViricides Inc. is a biopharma company that develops and sells drugs that treat viruses. I’ve talked a lot about it recently. Check out this chart…

NanoViricides Inc

NanoViricides Inc. (AMEX: NNVC) daily chart (Source: StocksToTrade)

Hot sectors don’t come around often … But when they do, there are always a few stocks that lead the pack. NNVC is one of the leaders in the coronavirus-related stocks.

The coronavirus situation continues to get worse. As of February 11, there are 43,146 confirmed cases and 1,018 deaths. It’s shut down entire cities and temporarily closed many businesses in China. That includes companies like Apple, Disney, Starbucks, and McDonald’s.

NanoViricides announced it was working on a treatment for the virus and its price jumped. In the past three weeks, it’s moved between a range of $3.31 to $19.20. As long as this sector stays hot, I’ll keep an eye on this one. 

This kind of increase and volatility is what we look for in our mentorship program StocksToTrade Pro. Come join us and seriously boost your market education with an awesome community of traders of all levels.

Alpha Pro Tech Ltd. (AMEX: APT)

Alpha Pro Tech Ltd. is another coronavirus-related play. These stocks are great examples of how a catalyst can move a stock. Let’s look at the chart:

Alpha Pro Tech Ltd

Alpha Pro Tech Ltd. (AMEX: APT) daily chart (Source: StocksToTrade)

APT manufactures disposable protective clothing used in hospitals. Think gowns, lab coats, shoe covers, and face masks. The stock soared from $3.41 to $7.86 in January. That was driven by speculation of its sales ramping up.

It’s a small but profitable company that’s been around since the 80s. And it has a history of spiking during health scares and virus outbreaks.

APT has a relatively low float, so a news catalyst or panic can get this one going.

Co-Diagnostics Inc. (NASDAQ: CODX)

Co-Diagnostics Inc. is a molecular diagnostics company with a unique platform that develops low-cost tests for disease detection.

It’s been running on news that its research use only Co-Primer test is ready for sale to labs and hospitals in need of a solution to the coronavirus epidemic.

In the past three weeks, CODX has run between $1.07 and $3.80 per share. Here’s the chart…

Co-Diagnostics Inc

Co-Diagnostics Inc. (NASDAQ: CODX) daily chart (Source: StocksToTrade)

Zynga Inc. (NASDAQ: ZNGA)

Zynga Inc. is an American social game developer focusing on games for primarily mobile and social network platforms.

ZNGA has been impressive over the last five years. It’s up almost 200% over that time frame. Let’s look at the chart:

Zynga Inc

Zynga Inc. (NASDAQ: ZNGA) daily chart (Source: StocksToTrade)

Last week, ZNGA jumped 11% from oversold conditions thanks to announced earnings. Bookings rose 62% to $433 million. That’s driven by strength in live services along with a boost from ad seasonality and yields. 

What’s working in Zynga’s favor? It’s in the fast-growing gaming industry. And gamers spend more and more time on their mobile devices. That can mean streamlined revenue potential on a number of levels. 

All this points to ZNGA being a potential candidate as a cheap stock on the rise.

Agile Therapeutics Inc. (NASDAQ: AGRX)

Agile Therapeutics Inc. is a healthcare company that focuses on the unmet medical needs of women.

Its product Twirla is a prescription contraceptive patch designed for once-weekly use. Despite several roadblocks to FDA approval, its prognosis is looking good … The company is looking at a vast and highly lucrative market if the FDA approves the drug.

A few analysts gave it bullish ratings and the FDA is scheduled to make its decision on the drug’s application on February 16. AGRX might run on anticipation of good news. Check out its chart:

Agile Therapeutics

Agile Therapeutics (NASDAQ: AGRX) daily chart (Source: StocksToTrade)

La Jolla Pharmaceutical Company (NASDAQ: LJPC)

Another biotech I’m watching is La Jolla Pharmaceutical Company.

It’s up from a 52-week low of $2.30 in late November to $8.98 in January. Most of that gain came after the company announced preliminary net sales of its Giapreza drug on January 9.

La Jolla Pharmaceutical Company

La Jolla Pharmaceutical Company (NASDAQ: LJPC) daily chart (Source: StocksToTrade)

Its next earnings report is estimated to come out on March 2. Good news could get LJPC going even more.

vTv Therapeutics Inc (NASDAQ: VTVT)

VTVT is a stock that’s been spiking off news recently.

It’s a biopharmaceutical company that recently announced positive results from its Simplici-T1 trial. The trial is to assess its treatment of adults with type 1 diabetes.

Now, the news catalyst isn’t earth shattering. The test results are only from part 2 of a Phase 2 study. The price move is likely a pop-and-fade move … 

But if you look at the four-year chart, the stock has been near lows for almost two years and looks to be starting a possible technical runup.

vTv Therapeutics Inc

vTv Therapeutics Inc (NASDAQ: VTVT) daily chart (Source: StocksToTrade)

VTVT has a relatively low float and earnings will be released next month. If the news is good, that might be enough to get this stock moving further.

Lineage Cell Therapeutics (AMEX: LCTX)

Lineage Cell Therapeutics is a biotech company that’s running. That run started after it delivered promising results to its ongoing clinical study of its treatment for dry age-related macular degeneration treatment.

LCTX hit a 52-week low of 54 cents back in December. But it pivoted nicely and is up over 260%. Since then, it’s approaching its 52-week highs. I’ll be watching to see if LCTX makes a comeback. Will it attract enough attention for a possible 52-week breakout? We’ll see…

Lineage Cell Therapeutics

Lineage Cell Therapeutics (AMEX: LCTX) daily chart (Source: StocksToTrade)

Benitec Biopharma Limited (NASDAQ: BNTC)

BNTC is a reverse split setup I’m watching. On November 18, 2019, Benitec executed a reverse split to keep in compliance with Nasdaq’s minimum bid requirement. As a result, its float went super low.

Here’s the chart:

Benitec Biopharma Limited

Benitec Biopharma Limited (NASDAQ: BNTC) daily chart (Source: StocksToTrade)

On February 7, the stock shot up from $5.15 to $11.61. That move came from news about a court order. In short, shareholders have to hold a meeting about a change in the company’s jurisdiction. 

Could this turn into a short squeeze? Here’s what to watch: Low floats, news, and an influx of shorts are key ingredients.

Sprint Corporation (NYSE: S)

You’ve probably heard about Sprint’s long-sought merger with T-Mobile. It’s been in the news for a while.

Sprint shares started spiking Monday, February 10, after a report that a U.S. district judge is set to rule in favor of the merger. That approval has since been confirmed.

T-Mobile is the third-largest U.S. wireless carrier by subscribers. Its merger with Sprint is worth $26.5 billion.

The deal can’t officially close until the California Public Utilities Commission approves it. But this is definitely something to watch. Especially if it speeds up its timeline in the 5G race.

Sprint Corporatio

Sprint Corporation (NYSE: S) daily chart (Source: StocksToTrade)

There you have it! That’s a list of the stocks I’ll be watching in the coming weeks.

Although any of these candidates have the potential to be one of the cheap stocks to buy right now, you still gotta follow the rules.

The 7 Rules of Trading Cheap Stocks

Whoa, Nelly! Before you start trading cheap stocks, you need a few pointers. Just because some stocks are cheap doesn’t mean you should rush in and buy without a strategy in place.

There’s a lot of technique involved in trading these stocks — you definitely need to know what you’re doing.

To help you with that, here are seven rules to help get you on the right track when finding, analyzing, and trading these stocks. Follow along…

#1: Look for Chart Patterns on Cheap Stocks

If you had to pick a go-to analysis for trading lower-priced stocks, chart pattern analysis should be at the top of your list.

Traders use chart patterns to track the footprints of other traders in the market. With a well-trained eye, you can spot fear, greed, frenzy, and disinterest — you can learn from the emotional extremes.

There are millions of chart patterns, and you can make it as complicated as you like … but don’t.

You’re generally better off learning a few simple patterns like the back of your hand. Keep it simple. Pick simple breakout trades, the dead-cat bounce, or the supernova pattern.

Find what works for you. Be an absolute master of your chosen patterns.

#2 Have a Trading Plan

No matter what you trade — tech stocks, cheap penny stocks, blue chips, futures, or options — it’s important to have a trading plan.

A trading plan is your set of instructions that detail your trading operations. It often includes specific details:

  • Your risk level
  • Your go-to trading setups
  • The types of stocks you trade
  • Entry and exit points
  • The case for your trade and so much more…

Think of it like one of those cool technical construction blueprints for a house or building.

Before a single brick is laid, there’s a well-defined set of instructions to guide the construction crew. At all times, everyone involved knows exactly what they’re responsible for and what to do.

Create your trading plan in the same way. Consider every single decision you’ll need to make in your trading: Do you buy more of a winning stock? Do you take a day off after a big loss? When do you jump into a trade and when do you exit? Build it all into your trading plan.

Well-planned trading is smart trading!

#3 Use Limit Orders, Not Market Orders

When you find a stock you want to buy, you’ll have to choose between buying with a market order or a limit order.

With a market order, if you tell your broker to buy 10,000 shares at market, they’ll buy 10,000 shares at whatever price the broker can get them at.

With a limit order, you set a price limit. For example, you might request that the broker buy you 10,000 shares at no more than $1.50. The order will be there until the broker is able to grab 10,000 shares at $1.50 or below.

A novice trader might think that the market order is better … you can get those shares super fast, right? Yes. But it’s a terrible idea.

Here’s why: Cheaper stocks often don’t have much liquidity, meaning there may not be many shares available for you to purchase.

If you try to get everything at market, your order might be filled at a price way higher than you wanted — or expected. That can cost you hundreds, thousands, or even tens of thousands of dollars, depending on the size you’re trading.

Don’t be foolish. Learn to think like a savvy, intelligent trader. In illiquid markets, use limit orders!

#4 Don’t Be Afraid to Walk Away from Cheap Stocks

Newbie traders can get excited when they find a promising trade. Sometimes they’re so keen on the trade, they end up doing something stupid.

Here’s the deal — and I can tell you this from experience — the market’s always there. Every single business day, the market will open, and you can find more trades.

So, don’t feel like you can’t walk away. Make sure everything aligns just right. That includes the trade setup, your entry point, and every piece of your trading plan. If something feels off or you’re called away from your post for any reason, always be willing to walk away from the trade.

There’s no rush, trading is a long journey. Never be afraid to walk away from a trade. There’s always tomorrow …

#5 Limit Your Losses

I don’t care how great of a trader you are, you will have losing trades.

In fact, it’s not uncommon for even the best traders in the world to win 50% or less of their trades. How are they profitable? It’s simple, their winning trades are bigger than their losses.

That means it’s absolutely necessary to minimize your losses as much as possible. Before you enter any trade, set a price at which you’ll exit if you’re losing money. That’s called a stop-loss.

You decide where to place your stop-loss. It could be 10% below your entry price, where the chart pattern is invalidated, or below a previous key support level.

Whatever stop-loss method you pick, make sure you always set it before you get in the trade.

#6 Follow the News on Cheap Stocks

Low-priced stocks can go on runs of 10%, 50%, or even way higher in a very short amount of time.

These price bursts are often due to a company getting news story hype or a company announcement. That means you gotta keep up with the news and buzz around your favorite stocks and sectors.

If you dedicate just a little bit of your analysis time each morning to searching for any news that could impact the price of a stock, it can help you spot the movers before they move.

Don’t have a ton of time? Use a scanner that can alert you to any news stories related to the hottest stocks or sectors. StocksToTrade can do all that for you with a few clicks of a button. Come and check out our news scanning capabilities with a 14-day trial for $7.

#7 Pay Attention to Cheap Stock Volume

Imagine you find an exciting looking trade. It has your favorite chart pattern, it’s in a clear uptrend, and there’s a major news catalyst out that morning. The stock is ready to blow!

You’re so excited to jump on the stock, you’re already counting your profits. You just know it’ll be up 20% or 30% on the day.

The market opens and you enter a limit order to buy 10,000 shares at $2. You eagerly wait to get your fill.

But then it all starts to fade. Your excitement wanes when you see few sellers of the stock. And the volume that does go through is tiny — 100 shares here, 200 shares there. You’re not getting any of them.

Depressed, you sit and watch as the stock makes its run of over 20% over the trading day. Yep, you called an amazing trade, but there was no one there to sell you the stock so you could get on board.

Sounds frustrating, right? It can happen a lot. Can you spot the mistake in this trade?

Before you get too excited about the trade, you should look at the stock’s recent trading volume.

Some cheap penny stocks can trade next to nothing each day. Hardly any buyers and hardly any sellers — those are called illiquid stocks.

So, to save you the future frustration, make sure there is enough volume when you’re choosing your trades. This rule can save you a lot of heartache!

Take Advantage of StocksToTrade Features to Trade Cheap Stocks

Whether you want to actively day trade or are looking for cheap stocks to invest in, you want to use the best tools for the job.

What are the right tools? I’m talking about charts, scanners, news feeds, data, watchlists, and more!

In the old days, to get all of these tools would mean countless subscriptions to websites and a lot of software. It was tedious, annoying, and expensive!

Thankfully today, you can get everything you need in one spot. That’s exactly what the StocksToTrade platform does.

The platform is designed by me and a team of active, everyday traders. It’s exactly what we need to fight the battle of the markets each and every day. It really is THE platform. And it’s created not by software geeks or corporate monkeys, but by real-deal traders.

Here are just of few of StocksToTrade’s powerful features:

  • The ability to scan for your favorite trade setups in real time. Just set your criteria and let the software do the rest.
  • Slick and easy-to-customize charting.
  • High-speed scanning capabilities for news stories, SEC filings, Twitter, and more.
  • Access to almost every stock traded in the U.S., including the pink sheets and OTC markets.
  • And so many more amazing features that we’re constantly expanding on.

So, if you’re currently battling the stock market without a top-of-the-line weapon, it’s time to better equip yourself. Grab a trial of StocksToTrade for just $7.

Are Penny Stocks Considered Cheap Stocks?

I love trading penny stocks. And yes, they’re considered cheap stocks.

Now, the term “cheap stock” can be subjective. But I like to keep things simple. To me, anything under $10 is a cheap stock. For some traders, it’s $5 or less.

Do Cheap Stocks Pay Dividends?

New students often ask me if cheap stocks pay dividends.

Dividends are more of a perk that can come with a long-term strategy. Looking for a company that pays dividends? These are bigger, established companies (think FANG or blue-chip stocks). These companies have a solid track record of profits and good cash flow.

Cheap stocks are cheap for a reason. A lot of times, these companies are struggling.

But the great thing about cheap stocks is that you can buy more shares with less capital. They have the volatile price movements that we need for short-term trading strategies.

Conclusion

Trading lower-priced stocks can be exciting … But it can also be a terrifying, money-burning endeavor if you don’t know what you’re doing.

The competition in the lower end of the market doesn’t always include the sharpest tools in the shed. But that doesn’t mean you should just jump into it with guns a-blazing.

Follow the seven rules above to learn how to play smart in this niche. And make sure to sign up for our weekly watchlist

Wanna learn more? Add the stocks from this post to your watchlist to track their progress. They all show some exciting potential. They may not be the right trades for you, but they can help you learn more about charting, hot sectors, news, and more.

If you don’t have a watchlist set up or a way to track charts and news, get a 7-day trial of StocksToTrade for just $7. You’ll have access to premium charts, news scanning, watchlists and much more!

What are your tips for trading cheap stocks? Share your best and worst tales of cheap-stock trading. Leave a comment!