Are Penny Stocks Best for Small Accounts?

I don’t like to make assumptions. (You know the old saying.) But, based on experience…

I’m guessing that if you’re like 90% of people reading this, you have a small account, you’re new to trading, and you want to figure this out…

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The Big Picture

With a small account the simple reality is that you pretty much have to day trade, okay? It’s just a reality.

Now, I don’t think that’s a bad thing. Learning to day trade penny stocks is the best way to build your trading knowledge.

If you can day trade penny stocks consistently, you can trade anything. That includes S&P futures, crypto, commodities or anything else.

I fervently believe that when it comes to risk management and pattern recognition, penny stocks are best.

It’s straight into the fire, and the fire is penny stocks. If you can make it out the other side, you can trade anything. If you want to go on to futures or options or crypto, it’s all transferable.

But you gotta get through the gauntlet and….

The Gauntlet Is Penny Stocks

Now, why do I say that?

• With penny stocks there is always a trade
• Penny stocks are cheap (obviously)
• As long as you’re trading the right penny stocks day-to-day, they’re very liquid. You can get in an out when you want
• Penny stocks force good decision making and good discipline
• And, on top of all that, I fervently believe it is one of the best ways to grow a small account

Let’s unpack that…

The dilemma is that if you choose another strategy, it’s difficult to move the needle.

For example, as a swing trader, you would be holding positions for days or weeks.

Well, guess what? With a small account that might mean you have 50 shares of a stock. Even if it goes up a lot in two to three weeks, it’s tough to move the needle. It’s a drawback, but it’s reality

Now, what you can do with day trading penny stocks is, you can make the same types of gains in much shorter periods of time. You can stay liquid. You’re not tied up in one stock for days, weeks, or months waiting for something to happen. Obviously, nothing is guaranteed and it takes a lot of studying and hard work.

My Take

I’ve always said that if you can trade penny stocks consistently, you can trade anything. The sky’s the limit. Start there. I firmly believe it can be one of the best ways to go from a small account to a big account

Watchlist

Yesterday (July 15) Electrovaya Inc. (NASDAQ: ELVA) had a big premarket move on low volume after the company announced “a commercial agreement with Amazon (NASDAQ: AMZN).”

ELVA pulled back pretty hard at the open before settling into a slow upward grind.

With a float of 34.19M, I’d love to see higher volume. Yesterday’s Oracle signal was $12.13. Keep in mind that ELVA is a real company and a slow mover. That said, it’s nearing a multi-week breakout close to all-time highs.

On My Radar

• June Retail Sales numbers drop today at 8:30 a.m. ET
• Try telling me it ain’t the golden age: House passes bill to make daylight savings time permanent
• I use Claude daily, but Anthropic sure knows how to scare people (it gets more optimistic near the end)
• According to Anthropic, “There’s hope in hard questions”