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Trading Penny Stocks: How to Find Trades

Jason BondJason Bond ·

Find stocks to trade is difficult. It’s even more difficult to find penny stocks to trade, if you don’t know what you’re looking for. Now, many believe that penny stocks are extremely risky, but that’s not true all the time. If you learn how to find penny stocks to trade, you could potentially reduce your risk. Many beginner traders looking to get into penny stocks don’t know what to look for, and if they’re permissioned for OTC markets, they’re trading in the wild wild west. That said, let’s take a look at how to find penny stocks to trade.

How to Find Penny Stock to Trade

When you’re searching for penny stocks to trade, you need to be aware of the exchange. In other words, you should only focus on stocks listed on the New York Stock Exchange (NYSE) or Nasdaq. If you have a screener included with your trading platform, that’s great. However, don’t worry if you don’t There are plenty of free resources out there to filter for penny stocks to trade.

Filtering for Penny Stocks to Trade

Finviz.com offers a screener so you could find penny stocks to trade listed on Nasdaq, NYSE and AMEX. That means you won’t have to deal with getting into risky penny stocks that don’t have stringent reporting requirements like these national exchanges. Remember, if you’re inexperienced, you should avoid those listed on OTC Markets at all costs.

Here’s a simple filter for stocks to trade.

Source: Finviz

Now, there are a lot of names here, but you can further filter this down.

Using Technicals to Find Stocks to Trade

I’ve found technicals to work out really well for me when trading penny stocks. Depending on which patterns you like to trade, Finviz offers various filters. If you go to the “Technical” tab on the “Screener” tab, you’ll see something like this:

penny stocks

Source: Finviz

For example, let’s assume you’re a technical trader and want to look to buy penny stocks at support levels. Well, you can easily do that with Finviz. All you need to do is go to the “Pattern” drop down and select “Multiple Bottom.” Once you select that and click on the “Charts” tab, you should see something like this.

penny stocks

Source: Finviz

Rather than searching for hundreds of stocks to trade, you would narrow your trading universe to only a handful. Thereafter, you could analyze these. It’s not enough to just find a pattern and trade it. You should look to combine catalyst events, such as corporate news, press releases and any other pieces of information that might move the stock.

Once you’ve filtered down the number of stocks to trade, you’ll want to research the company more.

Researching Penny Stocks

The last thing you want to do is buy a penny stock due to a technical pattern, only to find out the company could be a fraud. That said, you need to conduct your own due diligence. This means researching the company and looking at company filings. You could research the company by going to the U.S. Securities and Exchange Commission (SEC) Edgar website, which allows you to search for any and all company filings.

penny stocks

Source: U.S. Securities and Exchange Commission (SEC)

For example, looking at Cormedix (CRMD), you would see something like this:

Source: Finviz

You should read through the most recent filings and look at any potential material changes and catalysts. Moreover, you could look to the company website to get more information about the stock.

How I Find Penny Stocks to Trade

Generally, I like to use Fibonacci retracements to find stocks to trade. This takes time and experience to find the “right” Fibonacci plays. In general, I like to look for the ones that have had a strong move up and then pulled back. Although I generally look for penny stocks, that doesn’t necessarily mean they have to be trading under $5.

For example, here’s a look at a penny stock that I found that I might want to trade.

penny stocks

The stock had a huge run up and it’s now pulling back. Based off of technicals, I like the stock. Moreover, I conducted my own due diligence on this one just to make sure it’s not a scam.

Final Thoughts

When you’re looking to find penny stocks to trade, you need to be wary of a number of factors. For the most part, you should find penny stocks to trade listed on NYSE, Nasdaq or AMEX. Moreover, you’ll want to filter for penny stocks fitting technical patterns you like, as well as conduct your own due diligence.



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