How to find pennystocks? Find the best stocks under 1 dollar

How to find pennystocks

Pennystocks are – as the name suggests – securities that trade below one US dollar. Meanwhile, the term even includes stocks as low as $5. Investors with a high risk tolerance turn to pennystocks because it allows them to hold thousands of stocks for a relatively small investment. Then, when the price moves so that the low-cost securities significantly exceed their limit, investors make large profits. But how to find pennystocks? We will deal with this question in this post and give you some tips to find the right penny stock.

Penny stocks can be found on corresponding research portals for stocks. The search is extended by a technical or fundamental analysis of the respective company. In addition, criteria such as the existing upswing of a stocks or potential breakouts with new highs can help in the search for penny stocks.

Nevertheless, you should know that the price of such stocks can just as easily move towards zero. Not without reason, penny stocks are considered highly speculative due to their large bid-ask spread, low market capitalization and lack of liquidity of the companies.

If you would like to find out what penny stocks are and what risks and opportunities are associated with investing in and trading these securities, we recommend you read our article „What are penny stocks? „.

Table of contents

How to find pennystocks?

Finding a top penny stock is difficult. However, if you take the time to go through lists and gather information about individual companies, your chances of success in finding a suitable penny stock increase significantly. However, we definitely advise you not to buy such a cheap stock because your colleague raves about it and recommends it to you.

There are many websites that provide lists of potentially promising penny stocks. Here it is important to proceed with caution and be able to distinguish between legitimate penny stocks and those that are victims of pump-and-dump schemes.

A good website to start your research is the MSN StockScreener.  Here you can easily filter by the desired price per stock and other criteria.

After you’ve scoured a few lists, you should research each company that would be a good fit for you individually. You can evaluate the company itself using fundamental analysis or technical analysis, the latter being more common for penny stocks.

The question „how to find penny stocks“ is the one, relatively easy part. Now we give you some rules that will help you to choose a really suitable penny stock.

1. How to find pennystocks - look for stocks on the upswing

Search for favorable securities that are already on the move. This sounds very simple, but first of all it is one of the fastest ways to identify a strong upswing in the making, or a price spike.

Stock upswing

The reason for this first rule is that with such „up-and-coming“ companies there is usually a lack of information. If you follow this rule, however, you can – even if you should have missed the news – take a part of the movement with you.

2. How to find pennystocks - look for potential breakouts with new highs

Look for cheap stocks that are still up and holding their morning high. For example, if you notice on an afternoon that a penny stock is still holding its morning high, there is always the potential for a short squeeze at the close.

When potential breakouts reach new highs, the price may not hold above the previous resistance level.

3. How to find penny stocks - bet on price movements

Only the price performance can tell the true story about a stock. For example, does it break out to a new high or has it exceeded its VWAP? Unfortunately, no news site can predict these events. However, the chart of the stock can give you a clue.

Analyse price movement

Of course, this topic is under heavy discussion and no one will predict the exact future based on past performance. However, you can recognize patterns in these charts, if you only deal with them sufficiently. First, it is recommended to determine some directions – without investment – for yourself and check them later.

If one is then sure of his thing, some positions can be opened and pursued with small capital. Alternatively, it is definitely worth opening a virtual securities account once to try out the whole thing without financial risk and to get a feel for the matter.

4. How to find pennystocks - do your research!

One of the main reasons why penny stock investors fail is the lack of research. Many simply do not want to do any research and would rather have someone tell them what to do. However, when it comes to investing, this is simply not the right way to go and can lead to heavy losses.

Stock research

So if you want to find a suitable pennystock, look for former runners, read the news, watch hot industries/sectors and likeability plays. All of this gives you a good starting point for deeper analysis of individual interesting companies.

In the end, success requires hard work and determination; in other words, the ability to do what other people don’t want to do. You may not enjoy dry research, but it is absolutely necessary for highly speculative securities.

The additional time invested in research, brings you information that other traders may not have and also makes you feel more confident about your next investment.

Top Penny Stocks 2021

Check here if you’re looking for penny stocks that could have great potential in 2021:

• Top Penny Stocks to Buy in Early 2021
• 5 Penny Stocks to Watch in March 2021

Or read our post:

Penny Stocks 2021 – 3 Penny Stocks with Potential in the Current Year

Conclusion

We hope we could help you with this article to find a suitable penny stock. However, the rules mentioned here and especially the research are only basic requirements for investing in or trading with highly speculative securities.

Therefore, in another article we will discuss how you can analyze companies with favorable securities step by step. As already mentioned, technical analysis is recommended for this purpose.

FinancialHypes is your site for information on investing and trends in the financial market.

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