Money Talk With Slater

Making Money Across the Board

How to Make Money with Penny Stocks (Part IV)

 

Using Scanners to Find Penny Stocks

To trade penny stocks effectively, you need to discover the stocks that have the greatest probability of going big. For numerous traders, scanners are the best way to accomplish that.

Traders use stock screeners to slim down a huge list of available stocks to a little list with the characteristics they’re searching for. By putting on a filter to the stock screener list, you’re left with just the stocks that fit your parameters. Accepted filters include price, patterns, performance, and volatility, all of which can assist you in finding the stocks with the maximum potential for a big run.

The news can give you some good information on stocks. 

Three specific parameters to find these stocks are:

Breaking news. Searching for stocks that are gapping up because of a news break that can be lucrative for the company. Avoid stocks that have media hype from a buyout or likewise, since that typically means a loss for the shares or breakeven.

Float. The float is the number of shares really available to trade, which is computed by subtracting the closely held shares from insiders, the company’s stock ownership plan, and employees. Preferably, you want the float to be under 100 million shares, but 50 million is way better. When a stock has fewer shares to trade, there’s more buying interest that could push the price up.

High relative volume. The relative volume is a sign that tells traders how the present volume compares to the former trading volumes over a certain period of time, which gives you a notion of how “in-play” a specific stock is. The greater the relative volume, the more traders are observing and trading it, giving it lots of liquidity for you to trade.

After you make your watchlist based on this criteria, you can wait for the market to open and see if there’s a breakout over pre-market highs for an entry point, or wait for a bullish flag pattern, which indicates a move higher.

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