When you’re learning how to trade stocks, a lot of beginner traders focus on stocks under $10. Now, this is due to the fact stocks under $10 have higher growth potential and don’t require a lot of capital. For example, buying 100 shares of a $10 stock will cost you $1,000, but buying 100 shares of something like Apple Inc (AAPL) will cost a lot more. If you want to improve your risk-reward ratio, reading this Penny Stock Playbook can teach you how to locate inexpensive stocks with massive upside potential. If you’re just starting to trade, you might want to look for stocks under $10. You might be wondering, “How do I get started doing that?” Well, there are plenty of free tools out there to do this. I’ll walk you through my methodology to find stocks under $10 that could potentially generate hefty profits.
Stocks Under $10: Filtering for Cheap Stocks
There are thousands of stocks out there, but you want to find the ones that fit your trading strategy. For the most part, I focus on “cheap” stocks and size up in them. This strategy has been tested by the markets, and if you figure out how to use it, you could potentially make money. Now, the first step to looking for stocks under $10 is to find a good filter.
Finviz is a free tool offering a screener. You could screen for market capitalization, price, average daily trading volume, technical patterns, and fundamentals. If your trading platform offers a filter, then you can use that as well. However, we’re going to be sticking with Finviz here.
If you go to Finviz.com, you just click on the “Screener” tab and you should see something like this.
I’ve already gone ahead and filtered for stocks under $10.
Who wants to look through hundreds of symbols? Not me. You can filter this down further.
For the most part, I’ll focus on micro- and small-cap stocks. If you’re looking to trade small-caps and mid-caps, you can filter for stocks with a market capitalization between $300M and $10B.
When you filter by market capitalization, it’s easier to find stocks under $10 to trade.
Now, let’s filter for technical patterns. I generally like to trade stocks that have bottomed out and look like they’re going to rebound. Therefore, I’ll filter for stocks with the “Multiple Bottom” pattern.
If I see something I like, I’ll put it on my watchlist.
Stocks Under $10: Watchlist Example
Once I’ve found stocks under $10, I’ll delve deeper into these stocks. The Fibonacci retracement is one of my favorite tools to use. If there are stocks under $10 that have made a large move, I’ll look to buy on pullbacks using the trusty retracement tool.
“MNKD – Big win on this day 1 headed into day 2. Now it’s fallen into my favorite Fibonacci retracement pattern and on a Friday. A weak overall market could prevent the follow up move not to mention I generally like to see a doji after the first red day pattern, but I may give this a shot nonetheless if the overall market is green and it’s trading near $2. Goal is 10,000 shares for $.20 or $.30 / share same day.
MHLD – Bottom appears to be in on MHLD, only dropping -3% Thursday after a week of heavy selling that drove shares further into oversold. This isn’t the perfect oversold chart but I do believe I like the risk/reward now with about 5,000 shares above $3, for a move to middle $3’s on a swing or about $2,500 profit. Tight stop loss and look for candle over candle and try again later if this reduced volume candle Thursday doesn’t develop into candle over candle Friday.
APRN – Double bottom support and oversold. I’m cautiously optimistic here and will respect a tight stop-loss if this pattern fails. The upside of $.30 / share on 10,000 shares for $3,000 profit outweighs the risk of -$1,000 on a break of $1.72 at 3/1 and I’ll take those odds any day, not to mention this is a very real takeover target at this depressed valuation.
If you’re interested in diving into the heart of small caps, see how this strategy took me from debt to wealth and the simplistic system that you can learn in just one hour.
When you’re learning how to trade stocks, you might consider trading stocks under $10. These won’t eat up your capital, and you’re able to manage your risk better. Moreover, once you become consistently profitable trading cheap stocks under $10, you could size up and potentially make more money. You need good filters and need to understand charting and catalyst events. For now, you should focus on filtering for stocks under $10, put them on a watchlist and track them.
Jason Bond runs JasonBondPicks.com and is a swing trader of small-cap stocks.