I often talk about “real” stocks versus penny stocks during my webinars and other training sessions.
Penny stocks can be a flash in the pan, here one day and gone the next…
But when they’re here, they can move big.
But “real” stocks have decent fundamentals and actually make money. The majority of the time, these are swing trade names.
To learn more about swing trading, read my recent blog post.
The main points I look for in these names are revenue, assets, liabilities, and cash.
And I brought “real” stocks up last week during my Daily Double Down because one of these had shown up on Oracle.
99% of the time, these types of names don’t show up on our scanner. It was mainly designed to seek out penny stock movers.
But when “real” stocks do show up, I advise my students to pay attention because Oracle probably caught some price action on a stock with some actual substance.
By the way, if you’re not familiar with our proprietary algorithm, you should be! I couldn’t trade without it and neither should you!
Join one of our free live webinars to see Oracle in action.
Sure enough, Cerence Inc. (NASDAQ: CRNC), which appeared on Oracle last Friday, returned 73.68% after hitting its green Oracle entry signal.
CRNC Intraday, 5-Minute Candles Chart; SteadyTrade
And what makes this stock different from what we usually see on Oracle is that Cerence Inc. is generating revenue, has positive income and cash, and has a strong asset-to-liability profile.
So today, let’s dig into what we do differently when we’re looking at penny stocks versus “real” stocks like CRNC.
Table of Contents
The Cold Hard Truth About Penny Stocks
I won’t mince words here: all penny stocks are trash.
I know that sounds harsh, but it’s the truth. They’re speculative, hyped-up plays with shaky fundamentals at best.
And we don’t care…
Why?
That’s exactly what makes them such great trading opportunities.
Remember this about penny stocks: You’re not trading the company or its fundamentals. You’re trading the emotion behind the company.
One day, it’s a hot sector. The next day, it’s a hot ticker.
But don’t become attached. That stock you “love” could be gone the next day.
Trade the patterns and the volume in penny stocks…nothing more.
Why Charts Matter More Than Fundamentals for Penny Stocks
Stock charts are just visual representations of human emotion. And in short-term trading, that’s all that matters.
The patterns and volume repeat, giving you reliable and high-probability setups.
Remember, when it comes to penny stocks, don’t expect them to have:
- Assets
- Products
- Cash in the bank
- Real estate
- Patents
Most of these companies are running on a dream and steam.
Just know that you’re trading speculation.
Biotech penny stocks are a great example.
99.999% of them will never have a single sale. Yet they can run wild on a catalyst.
And don’t make the mistake of avoiding them because they lack fundamentals. You could be missing out on some of the best opportunities in the market.
To successfully trade penny stocks you need a robust platform that features real-time data, charting, technical indicators, and more.
My top pick, and the one I use every day, is StocksToTrade.
It features everything I mentioned above…PLUS, right now, you can get two weeks of both the STT platform and our Breaking News Chat service for $17.
Grab your 14-day StocksToTrade + Breaking News Chat trial today for only $17!
How to Look at Assets and Liabilities in “Real” Stocks
When you move into the realm of swing trading mid-priced, “real” stocks (say $6–$15), the game changes.
Here’s where fundamentals start to matter.
For swing trades, you’ll want to look for stocks that have:
- Actual sales
- More assets than liabilities
- Cash on hand
By the way, you can find all of this information on the StocksToTrade platform. It’s quick, easy, and helps you make smarter decisions.
Now, this doesn’t guarantee success, but it increases your odds.
Why?
Because when a fundamentally solid stock gaps down 1% or 2%, traders are less likely to panic.
On the flip side, when a $5 stock with no assets and massive liabilities gaps down, traders quickly dump their positions and the stock tanks.
If swing trading “real” stocks is your thing, you should check our AI swing trade bot, IRIS.
Subscribers to the IRIS program get weekly analyst reports, training webinars, and best of all, access to the IRIS system itself.
The tool operates much like ChatGPT to produce screeners, trading plans, and more.
Watch the presentation below to see if IRIS is right for you!
My Final Thoughts…
Whether you’re trading penny stocks or mid-priced stocks, the key is to approach them differently.
For penny stocks:
You’re trading emotion and patterns. Don’t get caught up in the fundamentals—they rarely matter in the short term.
For mid-priced, “real” stocks: Look for companies with cash, assets, and sales. Fundamentals give these stocks staying power and reduce the odds of catastrophic sell-offs.
But as I always say, stick to your trade plan.
Fundamentals can help you justify staying in a trade that dips near your stop, but they’re never a reason to break your plan.
So, whether you’re day trading penny stocks or swinging speculative plays, use the framework above to guide your decisions.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade