If you're a, smallcap trader, trading the top penny stock gainers should go to the top of your list of things to conquer. It's fun, it's exciting and you see gurus on Instagram making boatloads of money trading them.
Not to mention it's just downright exciting to trade them, and that's why they're alluring. Most of you reading this likely have a small account, which is what drew you to trading penny stocks in the first place.
Top Penny Stock Gainers
So you've got your $3-5K account, and a penny stock goes parabolic. The first thought in your head is, "I'm gonna short this down and bank huge!"
You start doing the math; a $3 move towards $5 and dollar signs start falling in front of you. Thoughts like "If I just short 1,000 shares and catch the $1 move back down, that's $1000 bucks! Holy crap, I can quit my job by just catching a few of these!". Not so fast.
Does that sound familiar? If the answer is yes, you're going to want to keep reading because penny stocks are volatile and can generate catastrophic losses.
Even with the top penny stock gainers. Our penny stocks list updated potential runners each night.
1. First Things First: What Is a Penny Stock?
According to the Securities Exchange Commission (SEC), a penny stock is any stock trading under $5.00 a share. Most of these companies are relatively new, without a proven track record of success.
Coupled with the fact they have a small market capitalization, they are inherently risky for both investors and traders.
But if you're up for a challenge, you'll find it with penny stocks. Typically these companies don't often make good long-term investments because they often crash and burn.
On the flip side, top penny stock gainers can offer tremendous trading opportunities; if you know what you're doing. Sometims you're long and sometimes you have to short squeeze stocks.
2. Benefits of Trading Penny Stock Top Gainers
Why should you trade top penny stock gainers? Needless to say, I could write an entire blog post listing all the reasons, but here are a couple of the main ones:
- Their potential volatility. Without a doubt, penny stocks are volatile. Often these stocks prices soar or crash on single news stories and hype created around the company. If you know how to spot and trade these monster moves, it's possible to make quick, sizable gains. Similarly, the lower the float, the more potential a pennystock has to do something nuts; because of this, don't get emotional. These parabolic runners are almost always low floats and most likely have some form of manipulation happening. The smaller the float (5-8M or lower) = less liquidity = more volatility
- The potential of exponential gains. It's not uncommon to see a penny stock soar up or plummet down over 100% or 200% in a short period. But, a small percentage of penny stock trades work out very well, which makes them appealing to those with smaller accounts.
- The speed. Not all penny stocks see quick movement in their market price. But unlike typical blue-chip stocks, when a move happens, it happens quickly. Also you don't have to wait for months or years to double or triple your money. In many cases, it's just hours or minutes.
3. How To Trade Penny Stocks
Experts would agree it's not recommended to buy and hold penny stocks for the long term due to their risk. Most of the time, we buy and sell penny stocks in a short time frame - think anywhere from a few minutes to a few days or weeks.
You need penny stock trading strategies in order to successfully trade top penny stock gainers.
How to Find the Top Penny Stock Gainers
- Find and set up a good scanner.
- What technical indicators work for you?
- What news is coming out?
There are many ways to find top penny stock gainers trade setups. Firstly, you can use a penny stock scanner to search for low priced stocks with a volume filter attached.
Or, you can set about 100 different screens depending on your criteria. In short, beginners should trade only high volume penny stocks because those with low volume are incredibly volatile.
Or you can check out our watch lists and trading alerts.
1. Set up Your Scanner to Find Gainers! (or Watch ours)
Due to the fact that there are thousands of top penny stock gainers traded each day, you must know how to locate the stocks with the highest potential.
Luckily, with the right scanner, you can find the needle in the haystack. A scanner allows you to quickly search the entire universe of penny stocks to look for the criteria that fit your trading plan.
It's up to you what you search for, but many traders look for things like volatility spikes, news stories, increased volume or previous big movers.
It provides a ton of data with a simple interface and is constantly being improved by their engineers. In fact, it helps us work smarter, not harder.
We love the high of day momentum scanner, especially as day traders. It shows us stocks that have massive volume, bullish breakouts at their high of day: A day traders dream. This stock scanner is mostly associated with the day trading crowd.
2. Choose Your Technical Indicators
If you ask five traders about how to pick top penny stock gainers, you'll get five different answers. While most traders start with chart patterns, I recommend using technical indicators.
My reasoning is this: They show and give you a more in-depth insight into the action on the chart. Technical indicators like VWAP, RSI and volume, for example, tell a story.
Maybe that sounds super-technical, but it's often as simple as showing the average price over the past 20 trading days (moving averages) or showing the difference in volume traded between up days and down days (OBV indicator).
When it comes to trading stocks, penny stock or Popeyes, I put the majority of my faith in technical analysis and patterns. I focus on charts, graphs and indicators in an "attempt" to determine the direction of a stock or the beginning, continuation or end of a trend.
Fortunately or unfortunately, the list of indicators available to identify potential penny stock gainers is endless. Ranging from volume, MACD, EMA, SMA, RSI, PSAR, VWAP and even float.
When I started trading, I was under the impression that more was better. I suggest you test a bunch of them, see what works for you, and only pick a few. Please keep it simple.
3. Wait for the Catalyst or Big News Story
Top penny stock gainers that have massive moves up or down on the same day are the ones we want to trade. We often see these moves after the news (i.e. positive results in a cancer trial).
More often than not, the spikes happen out of the gate and last for about 30 minutes. Further to this, many times, the gap up occurs in the pre-market.
In order to catch these pre-market gappers, take the time to source and set up a good scanner. We look for these in our penny stocks trading room.
Whether it be large cap or small cap stocks, trading them can be confusing. And this is no different for penny stocks. Likewise, the top penny stock gainers can either be your best friend or your worst enemy.
Unfortunately for most, the latter. Even though you "have fun" trying to trade them, you're probably not very profitable doing so.
But the fact remains, if you trade low float penny stocks like other professionals trade large cap stocks, there's a good chance you will succeed. Let us take the confusion out of the game for you and teach you how to trade like the pros.