I love trading penny stocks. And I love teaching my students how to trade. This niche is my passion. But you have to be smart about how you approach it: high-volume penny stocks can be key to trading consistently.
Trading high volume penny stocks is the best way to grow a small account. And I should know … I started over 20 years ago with just over $12,000. Today, I’ve made over $5 million in profits.** Yep, all from trading penny stocks. I’ve watched my top students take my lessons and grow their accounts, too.
And now, some of those students trade better than me. Frankly, I love that. It means I’m doing my job as a teacher well.
(**These results are not typical. It’s taken me and my top students years to develop exceptional trading skills and knowledge. Always remember ALL trading is risky. Never risk more than you can afford.)
Right now — in all the madness of 2020 — this is an incredible time to learn how to trade. You can even start with a small account. There are so many high-volume penny stocks with crazy spikes. It’s insane trying to keep up.
But as fast as the prices run up, they can crash too. So you have to know how to trade smart and safe.
I’ve already made more from trading in 2020 than I did in 2019. I’ll discuss that more in a bit and I’ll share a few of my strategies with you…
But first, let’s answer this basic question…
What Are High-Volume Penny Stocks?
A penny stock is any stock that trades under $5. Some penny stocks trade on listed exchanges like the New York Stock Exchange (NYSE) or the Nasdaq.
Are penny stocks sketchy? Oh yeah. Some are so sketchy they don’t qualify for the big exchanges. Instead, they trade over the counter on the OTCMarket.
High volume happens when a catalyst of some sort drives a flurry of new buyers into the stock. Anything from a new contract, press release, or a rumored buyout can act as a catalyst.
Then there are the stock pumps. These pumpers lure buyers into stocks by touting them as the next BIG thing — like the next Microsoft or Netflix.
All this action can mean traders and investors jump to buy. A stock that normally trades 100K shares a day starts to come to life.
When you see the volume picking up to 200K, 500K, or even 1 million shares — that’s a sign something’s up.
I look for a volume of at least one million shares. I wanna see the daily volume at least two or three times the daily average.
Dollar volume matters too. One million shares of 1 cent stock is only $10,000. I never want my order to be more than 1% of the overall volume.
I know this seems like a lot. Don’t worry — I have a system that can help with all these decisions. More on that in a bit.
Now you know what high-volume penny stocks are. These are the kinds of plays I look for.
How to Find High-Volume Penny Stocks
No secret here, I use StocksToTrade every day.
It’s the best program out there for finding penny stock opportunities. It’s designed by traders for traders. Nothing else out there even compares.
I used to scan hundreds of emails, message boards, and news sites every day for the hottest plays.
Today, I have more time to live the life I want to live. That’s because StocksToTrade does a LOT of the heavy lifting for me.
Scan for the top percent gainers and sort by volume. This will show you the hottest plays and put the high-volume penny stocks at the top of the list.
If you’re not using it you should be. Start today for only $7.
(Quick disclaimer: I helped design and develop StocksToTrade.)
How to Choose High-Volume Penny Stocks to Trade
The stock market’s been crazy this year. It seems like there are huge winners every day. Some go full supernova and some fizzle out.
How can you tell which stocks can really run?
The truth is you can’t. You can’t predict — you have to learn to react. That’s why I teach a process. Buy only when you find the right setups. And cut losses quickly if the trade goes south.
I know which patterns fit my strategy. And I build a watchlist every single day. (Sign up for my FREE watchlist here.)
I want every one of my students to be self-sufficient. But I know it’s not easy in the beginning … So I created special alerts to notify you of the hottest plays in real-time.
Watch my Supernova webinar replay and sign up for my Supernova Alerts here.
These alerts can be a fast way to help you spot the hottest plays in the market when they happen.
Repetition is key. The best way to learn these patterns is to see them over and over again. So study former runners … They can run again.
It’s easy to see the best plays in hindsight. But it takes time to learn to recognize them in the heat of the moment.
Recognizing them is the first step. Next, you must be able to trade them. And you gotta have the right tools to trade these stocks.
So we need to talk about something a little less glamorous…
Order Processing
You need a broker to process your trade orders for you.
And you need to use the right broker for your strategy. It’s an important step that you can’t afford to overlook.
As with most things in life, you get what you pay for. Cut-rate brokerages like Robinhood don’t allow you to trade all penny stocks. (Don’t get me started on Robinhood’s order executions.) And slower systems struggle to keep up with high volume.
No broker is perfect.
Even the brokers I use have issues sometimes. Here’s a great example … I made this video after all my technology failed me on the same day:
Technical issues can happen to anyone. That’s why it’s so important to manage your position and your risk.
The great thing about high-volume penny stocks is that you don’t need to capture the whole move. Getting a small piece here and there can add up in the long run.
The goal is to take small, consistent profits. You also gotta cut losses quickly when you’re wrong. It’s rule #1. We also need to talk about…
Liquidity
High volume means the stock is liquid. Illiquid stocks have low volume. It’s difficult to trade illiquid stocks.
Here’s an example: if you buy 1,000 shares and the volume is only 20,000, that’s 5% of the volume. Your order could move the price. And it’ll be difficult to sell those shares.
So stick to high-volume stocks. You’ll have far less trouble getting your orders filled if the stock is liquid.
Low-volume stocks aren’t worth the risk.
Always take volume into account when scanning for stocks. It’s good to be early to the party — but you don’t want to be first.
StockToTrade can help you with this. You can set your scanners to only show you stocks that trade at least a few hundred thousand shares. Volume and dollar volume are part of my “Trader Checklist” criteria. Find out how I decide which stocks to trade every day here.
2020 High-Volume Penny Stocks Watchlist
By the time I finish writing this post, the next hot stock has already spiked and crashed, and the market’s on to the next play. The hottest high-volume penny stocks change constantly.
The hottest plays change by the week, by the day, and even by the hour…
Start your week off on solid footing. Sign-up for my FREE weekly watchlist and you’ll know what I see in play every week.
Now, let’s make sense of all this with some examples.
Coronavirus Plays
2020 is a year like no other. There have been so many hot sectors since the coronavirus pandemic threw our world into chaos. And each hot sector brings sympathy plays.
But hot sectors can change … so it’s critical to keep up with what’s going on in the world. Let’s look at how the pandemic affected specific stocks and brought crazy volume in for huge spikes.
Food Delivery
When the first stay-at-home orders were issued, Blue Apron Holdings, Inc. (NYSE: APRN) was a big spiker. People gotta eat, and this company offers food delivery. The low float helped too.
Here’s a chart from the APRN supernova. Note how the volume increased from under a million shares per day to nearly 50 million shares in four days from March 16–19.
Vaccines
As the pandemic rages on, medical experts scramble to come up with a solution. On February 3, iBio, Inc. (NYSE: IBIO) was one of the first to announce it was working on a vaccine.
IBIO actually had two spikes in volume. The first was to nearly 100 million shares. The second spike was the real winner — with over 250 million shares traded in a single day.
Here’s that chart. Take note of the volume bars at the bottom — huge jump:
Reopening
As states began reopening, Remark Holdings, Inc. (NASDAQ: MARK) came into play. The company claims to offer a touchless temperature screener with AI technology.
MARK was trading less than 100K shares per day back in February. After a few weeks of pumping, more than 230 million shares of MARK traded on May 12.
Can you see how a hot sector can change depending on the news?
Let’s look at one more example. High-volume penny stocks don’t always go up in price…
Oil Prices
Because of the lockdown, travel has pretty much stopped. Even I’m staying put in Los Angeles. Usually, I’m traveling around the globe to find new amazing places to trade from.
As travel slowed way down, so did the demand for oil.
Then a price war between Saudi Arabia and Russia increased the supply. No one thought it could happen, but it did … Oil prices went negative.
During this unprecedented time, some higher-priced oil stocks have become penny stocks. Marathon Oil Corporation (NYSE: MRO) is a prime example. It fell from $14 at the beginning of the year to $3 by April 1.
In this example, the higher volume didn’t lead to a price spike. It was actually the opposite.
Notice on this chart that the volume’s gone way up … but the price hasn’t rebounded.
There’s a lesson here … Don’t buy downtrending stocks.
You want all the conditions to be in your favor, not one or two. I’ve got seven points I always review before I enter a trade.
My “Trader Checklist” provides you with a thorough guide to judge potential trades and help you decide if they’re worth the risk. Which brings me to a good reminder…
Use Caution
Trading is brutal if you don’t know what you’re doing. I want to tell you some horror stories so you understand the risks…
MicroVision, Inc. (NASDAQ: MVIS) and AgEagle Aerial Systems, Inc. (NYSE: UAVS) both made huge moves. They started under $1 and skyrocketed to $3 and even $5. But the gains didn’t last.
The pumpers were calling people idiots for selling “too soon.” There were rumors of big news coming soon.
That brings me to another rule. Lock in profits quickly. Never hold and hope. I’ll tell you why…
One rumor was that Microsoft Corporation (NASDAQ: MSFT) was buying out MVIS for $10 per share. The other … UAVS had a big deal with Amazon.com, Inc. (NASDAQ: AMZN).
The reality: they were all lies.
MVIS is now behind on quarterly filings. The CEO of UAVS resigned on a conference call in the middle of the trading day.
You have to use caution when trading high-volume penny stocks. While the profits may look enticing, the dangers are all too real.
That’s why I trade these stocks knowing they’ll likely crash at some point. I never hold more than a few hours.
Sure, I miss out on some big runups. But more importantly, I protect myself from taking a big loss.
Trading Challenge
Let me tell you about a few top traders I work with…
Kyle Williams, Jack Kellogg, and my latest top student Matt Monaco. I was recently on the TWIST podcast with these traders … And they all have at least two things in common:
- They all report over $100,000 in trading profits.*
- They all come from my Trading Challenge.
(*Students’ results aren’t typical. These students put in the time and dedication and have exceptional skills and knowledge. Most traders lose money. Always remember trading is risky … never risk more than you can afford.)
These students all worked and studied their butts off until they found a strategy that works for them. They know what it takes to be a truly self-sufficient trader. Just check out the podcast and you’ll see what I mean.
What about you — are you ready to put in the time? Are you dedicated to learning to trade? Then show me. Apply to be my next Trading Challenge student now.
Conclusion
You have to learn the trading process — you can’t just dive in and expect to get it immediately. It takes time to find your strategy and to understand how stocks move.
Volume is just one piece of the puzzle.
High-volume penny stocks can be a great way to grow your account. But know what you’re getting into with this niche.
Start with one pattern. So far in 2020, I’m slaying trades with the morning panic. I trade fast and lock in my profits quickly. Remember how at the beginning of this post I said I’ve made more money in a few months this year than in all of 2020?
It’s because I know how to adapt to the market. This market is insane. I honestly could even be trading better. I still miss plays — that’s OK. What’s key is that I know my patterns and I’m prepared to take advantage of the opportunities in this market.
You have to find what works best for you and stick with it.
Buying and holding is a recipe for disaster. Learn how to trade these plays before you make your first trade.
Your education is key. So do what my top students do and study every day. Paper trade to gain experience and get comfortable with the price action and movement.
What’s your experience with high-volume penny stocks? Do you have a plan to trade them? Let me know, leave a comment below.
The post High-Volume Penny Stocks 2020: Smart Tips for Trading & Your Watchlist appeared first on Timothy Sykes.