You want to get into the stock market but can’t afford to spend $100+ per share for good stocks. Here’s how I find winning penny stocks under $15 per share.
Before starting, it’s important that you know where to buy stocks. Robinhood is by far the easiest method to buy penny stocks, so I’ll be using that broker for this tutorial.
After downloading the Robinhood app, open the app or visit the Robinhood website to set up your account. It will require your name, email, and password. Then, it will require you to enter your contact information and identity verification.
Once you’re finished, add your bank account and fund your Robinhood account with at least $100 to get started.
Go ahead and download the Robinhood app for Android or IOS. By using the app, you will have access to your trading account anywhere with an internet connection.
I also have to point out technically, you can’t buy penny stocks (stocks under $1) on Robinhood – unless
Find winning penny stocks
Here’s a complete step-by-step guide on the process I have used to find winning penny stocks no matter the market sentiment. Keep in mind, this method is not a guaranteed way to find winning penny stocks, but most of the time it works.
As of lately, the market isn’t as predictable as I’d like. Though, there are ways to minimize losses. By using stop losses, you can make sure you automatically sell if the stock price falls below a certain amount. Adam Khoo knows the rules.
Always remember, when trading penny stocks there are no long-term winners. These are usually companies just on the verge of collapse and are seeing a slight upturn. Use this to your advantage and gain 5-20% profit and get out. There’s no reason you should lose your hard-earned money by investing in these crap companies.
Setting up your penny stock filters to find winning penny stocks
On the Stock Screener page, click the “Applied Filters for Stocks screener” to expand the stock screener filters. Set the filters up like such:
- Percent Change: greater than 3
- Region is: United States
- Market Cap (Intraday) is: Mid Cap, Large Cap, Mega Cap
- Volume (Intraday) greater
- Price (Intraday) less
Add more filters by clicking the “+ Add another filter” link at the bottom of the filter list. It should be set up like the following.
Now, click the “Find Stocks” button to search for your winning penny stocks. Here’s the list I got on 12/13/18.
When looking for percent gainers, I look for a volume in the millions. Lower volumes will cause you to get stuck in a trade. If there are not enough people buying, you’re going to have a hard time selling.
Also, look at the price; the cheaper the better. After all, you can afford more $5 stocks than $20 stocks. Now, if you see that the stock rose 20% Today, there’s a high chance it will see at least another 5% raise Tomorrow. Just remember to set your stop loss after buying your shares and wait it out.
Above you can see the 5-day chart of the $QD stock. Notice, this screenshot was taken a day after on 12/14/18. If you would have bought at $6.32 the previous day, you could have made an easy 50 cents per share. That’s an 8% gain in one day.
Things to look for in penny stocks
Find the catalyst; the action that occurred which caused the price of the stock to go up. If you find a stock that had a good press release, but the value stayed stagnant; it’s a good time to buy.
When researching a company, be sure to look at the total debt of the company. You can find that information in the firm’s balance sheets in their financial statements. If there’s a lot of debt, it’s a sign they’re struggling to stay in business.
On the other hand, if the company seems to have more value in assets than debt, it means the company has lots of working capital. Which is a very good sign.
When to sell
Most of the time, you should be aiming for a 5-20% gain. Greediness in stock trading is an easy way to lose it all. So take your 5-20% gain and be happy.
Penny stocks aren’t long-term investments. Sometimes you’ll be day trading, other times you’ll sell after a few days or even after a few weeks.
Things to avoid when trading penny stocks
Understand that penny stocks are offered by the bottom of the barrel companies that are in desperate need for capital. Which is why these stocks come crashing down eventually.
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Don’t hold over the
Why is that not good? Markets are closed on the weekend, and you can’t predict what the rumors/news will be. So when
Buy the rumor, sell the news
When you’re researching a potential winning penny stock, find the catalyst. If you find that the sole reason for the price increase is related to rumors, stories, news that will be announced in the coming days… it’s a good sign.
Use this to your advantage and watch the hype. Just before the announcement is when you sell. Wait for the price to go up to your target price and sell. Buy the rumor, sell the news. Don’t worry about what the news is or how great it seems; it’s usually not great.
Where to go to find conversations about a certain stock
There are a couple of places I recommend, Twitter and StockTwits. By using Twitter, you can search for the stock symbol with a dollar sign – such as “$QD”. On StockTwits, you can sign up and watch specific stock tickers.
Be aware that there are delusional people on these sites (especially Stocktwits). It can get pretty dark sometimes when you see users talking about just holding onto their bags because they didn’t sell in time.
You’ll occasionally see those types of investors… making statements such as “Just a couple more weeks for the news” or “It’s a bull trap”.
Mind your business
It’s your money on the line with these penny stocks, so treat it like a business. It’s important to keep track of your stocks throughout the day. Failing to do so will lead to a higher losing percentage.
Be wary of pump and dump scams
Pump and dump scams have been around since the beginning of the stock market. These scams involve a group of people hyping up a stock and then selling at the top. By getting others to invest their money into the scam, the scammers are able to steal the invested capital from the unsuspecting victims.
How to avoid pump and dump scams
If something seems to good to be true, it usually is. This old adage rings especially true for the stock market.
When you find a potential company to invest in and realize the news is all magical flying unicorns, fairy tales coming true and growing money trees — stay away… stay far away. This is a pump and dump scam and unless you’re shorting, it’s not worth you time.
I’d go as far to say that the less ground-breaking the news the better.
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Tracking your stocks
By using the Robinhood app, you have the ability to view live price action and buy, add to your position, or sell from anywhere with an internet connection.
Other stock tracking apps to download include Ticker Stock Portfolio Manager, Yahoo Finance, StockTwits, investing.com, and Real-Time Stocks Tracker. These apps are available for IOS and Android devices.
By now you should be familiar with what penny stocks are, things to look for, and things to avoid. I explained what penny stocks are, how to find winning penny stocks, and how to protect yourself from losses.
Now, you’re all set to start day trading penny stocks to gain an average of 5-20% with each trade. If you found this article helpful, please share it with your friends and anyone that may also be interested in learning.
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