Penny Stock Charts

How to Read Penny Stock Charts

4 min read

Knowing how to read penny stock charts is important if you want to be a day trader. Understanding things like price action, candlestick patterns, volume, moving average lines, vwap, and trendlines makes all the difference in the world towards becoming a successful trader. Knowing the fundamentals of a stock is great, but you need to learn the right areas of where to buy and sell to be profitable. 

Knowing how to read penny stock charts effectively is important when day trading. We are huge proponents of always having a chart of the S&P or futures up while trading so that you can be aware of what’s happening in the overall markets. Penny stocks move with the overall markets. We explain and show you how to use an S&P chart while day trading and its benefits in this video.

Knowing how to read penny stock charts is the most important part of trading penny stocks. Penny stock trading is risky, so stick to the charts because the charts don’t lie.

The penny stock sector is filled with manipulators and pumpers. Hence the risk in trading them. Penny stocks are also attractive to traders, especially new ones. They’re cheap to buy and promise big rewards.

Reading the charts before placing as trade is important in this case. You may hear people say the charts don’t matter. That is unequivocally not true. The importance of penny stock charts is in the patterns and the technicals. 

A penny stock is defined as any stock $5 and under. However, a lot of people think of them as cheaper than that. The penny stock charts of the larger dollar amounts will probably be the easiest to read.

How to Read Penny Stock Charts

Technical Analysis With Penny Stock Charts

Technical analysis works with penny stocks. It’s the best way to trade penny stocks. Fundamental analysis is tricky with penny stocks because the company’s financials usually aren’t good. Knowing how to read candlestick patterns and technical analysis is the key to success.

You can use technical analysis to trade penny stock charts with candlesticks and patterns. Moving average crossovers can give you buy and sell signals and act as support and resistance.

The Patterns

Candlesticks group together to form patterns. Patterns give direction, whether continuation or reversal. For instance, someone tells you to buy XYZ stock because it’s going to the moon, but there are clear head and shoulders patterns.

That is known as an F you pattern, and for good reason. You’re probably about to lose your money if you take that trade. Patterns are a safeguard against pumpers and manipulators.

Penny stock strategies should include trading patterns. The penny stock charts don’t lie. Look at the charts whenever someone tells you a stock is going to the moon.

Who wouldn’t want to get on the ground floor of something big and make a ton of money? Everyone would, but how realistic is it? Not very.

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High Volume

Volume confirms trends, verifies there will be buyers when you want to sell, and prevents slippage. Now you’re probably wondering how high it is.

This is a personal preference, but some traders won’t trade anything less than a daily volume of 500,000 shares. 

Why Penny Stock Charts Matter

Everything else you’ve read up to this point proves why penny stock charts matter. The sector is manipulated and pumped. Never listen to the success story of someone else.

In the penny stock sector, there are a lot of success stories of people becoming millionaires. That may be true, but that is the exception, not the norm.

If you get into penny stock trading to get rich quickly, you’ll probably fail. Trading is hard and takes time, practice, and stock market training. Penny stock charts are there to be your guide.

If you need more help, take our day trading course.

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