I’ve been saying it for days now…
This market is packed with endless trading opportunities!
Every kind of setup: morning faders, dip and rips, VWAP holds, red-to-green candles, short squeezes…you name it, it’s there.
And every morning, I stare in amazement at the seemingly endless list of green signals in Oracle.
We’ve had some massive runners lately—take a look at Bright Minds Biosciences Inc. (NASDAQ: DRUG) from last week…
And what’s most exciting about stocks like DRUG is I see plenty more of these in the future.
With so many setups around every corner, today I want to talk to you about a certain sector of the market that we can really capitalize on:
That sector is penny stocks.
There are tons of penny stock plays out there right now so let’s dig in…
What Really Is a Penny Stock?
First, let’s define a penny stock because it can be a little confusing…
There’s a big misconception that penny stocks are literally stocks that trade for a penny—or even a fraction of a cent.
In reality, a penny stock is any stock trading for under $5 a share. Most are in the $1 to $3 range, but by definition, they’re anything under $5.
So Why Trade Penny Stocks?
So here are my top reasons for trading penny stocks:
Extreme Moves:
You might like the big names like Amazon.com Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), or Microsoft Corporation (NASDAQ: MSFT), but those stocks can take weeks, months, or even years to move 10 or 20%.
Meanwhile, penny stocks can make 20% moves in minutes…and sometimes even 100%, 200%, or more in a day.
Liquidity:
The second reason is how easy it is to get in and out of trades.
When a hot penny stock is moving, it can trade tens of millions of shares in a day—sometimes even hundreds of millions.
And with huge price moves you need to be able to get out of your position if the stock moves against you. Stocks with low liquidity can trap you in the trade.
But remember this: Avoid any penny stock trading less than a million shares a day. Ideally, look for ones trading 5 or 10 million shares for that liquidity cushion.
The Reward for Diligence:
With big-name stocks like Apple or Amazon, you’re up against the smartest analysts on Wall Street. Competing with them is tough.
The great thing about penny stocks is that the big hitters largely ignore them — so it’s just you and your willingness to dig into SEC filings, press releases, or news.
You can get an edge long before Wall Street even notices.
And if you don’t have the time or the energy to do all that work, guess what…we have a service that does all that heavy lifting for you.
Breaking News Chat is a financial news chatroom led by veteran Wall Street traders, each with over 20 years of experience. They filter out all the noise and give you only the information you need.
My blog post highlights some of the big price action BNC has nailed before the rest of the market had a clue.
Get ahead of the market with the Breaking News Chat!
Freedom:
Every single day there’s a low-priced stock moving somewhere in the market.
Some days, especially currently, you might even see three or four movers.
So you can take a day, a week, or even a month off, and you won’t miss out because the market is always giving us new penny stock setups.
Unlike higher-priced “real” stocks that might only move with the broader market, penny stocks often don’t care if the market’s up or down.
How to Find Penny Stocks
Set Up a Stock Scanner:
With a solid scanner, you can quickly sift through the entire universe of penny stocks (or whatever you prefer to trade) and filter out the noise.
Over time and with more experience, you’ll develop your own criteria—volatility spikes, news catalysts, increased volume, or former runners.
Analyze Chart Patterns:
You want to find trades that offer the best risk-to-reward ratio — setups where you can put up the smallest amount of capital with the most significant potential upside.
This is why charting your stocks is critical. With charting, you can look for patterns, such as price and volume.
The more you practice reading charts, the more you’ll recognize how traders react at key levels.
Use these patterns to build your trading plan, so you’re ready to act when the stock hits your entry point.
Every successful trader needs a well-constructed trading plan. Do you have one? Watch my video to learn how to create one of your own.
Use Technical Indicators:
If you really want to fine-tune your trades, you’ll want to overlay your stock charts with technical indicators.
Indicators take price and volume data and help you make sense of the stock’s momentum, volatility, and overall strength.
Every trader has their go-to indicators. Try out a few and see which ones help you the most.
Look for News Catalysts:
Want to know how to catch penny stocks before they make those explosive moves?
It’s easy—keep an eye out for news catalysts.
A catalyst is anything in the news that could cause a stock to move…
A company management change, a product launch, a huge new contract, a geopolitical event that affects the sector…there are a lot of catalysts that can move a stock.
Unfortunately, the action can be short-lived. If you can spot the news early and react quickly, you’ll be able to get in at the right time.
Check the Trading Volume:
Like I said earlier, don’t forget to check the trading volume.
You could have the perfect penny trade setup but if the volume’s not there, it’s meaningless. Trading an illiquid stock is a recipe for disaster.
One million shares per day should be your absolute minimum volume threshold, and you’re even better off at 5 million or above.
Use a screener to filter out penny names trading below those minimums to ensure you’re trading liquid stocks.
With all of that being said, you won’t be able to do most of the things I listed above without a robust trading platform.
If you don’t have one, my top pick is StocksToTrade. It has the trading indicators, dynamic charts, and stock screening capabilities that traders like me look for in a platform. It also has a selection of add-on alerts services, so you can stay ahead of the curve.
Grab your 14-day StocksToTrade trial today — it’s only $7!
And if you’re looking for the perfect way to spot penny stocks and know when to buy them, you need to check out our Oracle system.
Oracle is our proprietary algorithm that scans the market every single morning and identifies 15 to 20 stocks based on criteria like price range, volatility, and premarket volume.
It then generates a list of those names along with a green “buy” or red “short” signal along with an entry price.
To learn more about Oracle, join our StocksToTrade community.
We have tons of free live webinars.
They run all day and offer trading tips and tricks, info on Oracle, and other valuable training.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade