How To Set Up A Penny Stock Screener

Penny stocks present an overlooked and potentially extremely lucrative opportunity for 24-hour interval traders. While these types of stocks nowadays their own set up of hazards, such as low liquidity and oftentimes murky company fundamentals, cautious traders who know what to look for can find success in trading penny stocks.

In this guide, we'll explain everything you lot need to know about trading penny stocks and prove you how to set up actionable penny stock scanners with Scanz.

What is a Penny Stock?

Broadly speaking, penny stocks are whatsoever stocks that merchandise for less than $5 per share on over-the-counter (OTC) markets. These stocks are normally issued by small companies trying to raise money from public investors, in the same way that larger companies effect stocks on the major exchanges. Just, beware that many companies issuing penny stocks have very little cash on hand and may or may not accept an established market.

What Should Penny Stock Traders Look Out For?

Trading penny stocks is significantly riskier than trading stocks on major exchanges. SEC regulations are much looser since most penny stocks are traded on a quotation system rather than an exchange. In fact, one of the two largest penny stock listing services, Pink Sheets, doesn't enforce any requirements around market cap, share cost, or other safety factors on the stocks it lists.

That means that you lot need to be extremely cautious to vet the companies you're trading. Unlike stocks trading on major exchanges, there's no guarantee that you'll exist able to admission detailed or verifiable fundamental data for companies trading every bit penny stocks. It'south essential to do your due diligence to decide whether a company is real or a scam, and whether its growth potential justifies the current share toll. Keep in heed that rumors and bits of news tin create huge price movements in the penny stock market in a way that they wouldn't be able to on major exchanges.

Liquidity is also a business concern when trading penny stocks. Since in that location are and so many companies listed and relatively few traders buying and selling penny stocks, it tin can be hard to buy or sell shares at the quoted toll. In practice, that means y'all'll need to use limit orders nearly anytime y'all buy or sell.

On top of that, low liquidity results in high volatility. Low prices and low float mean that private investors tin can move the price of a penny stock significantly without a huge amount of capital. Even small-scale amounts of legitimate trading activity can pb to major price swings that you wouldn't unremarkably run across on major exchanges. This volatility is a large part of the allure of penny stocks, since it offers significant opportunities for turn a profit, but it'southward also a major risk cistron.

What Makes a Skillful Penny Stock Scanner?

The first step in creating a penny stock scanner is to figure out what your strategy is. Are you looking for penny stocks that have hit stone bottom and are ready for a bounce? Or are yous looking to get into a stock that's rising on momentum to execute a swing trade? Many of the same chart patterns that apply to big-cap stocks apply to penny stocks, although you need to be cognizant of how low liquidity and high volatility can change the timescales and explosiveness of these patterns. Retrieve about your timeline, too – penny stocks can be traded on an intraday basis, but they can also be bought and sold over multiple days or weeks.

Once you've narrowed down a scan to look only for a specific type of setup, yous can home in on the best prospects. Trading volume is more important than ever when you're trading penny stocks, since you need plenty liquidity in the stock to be able to smoothly enter and exit a position. And then, a volume filter is always a good idea.

Depending on your strategy, you may as well desire to look at cost volatility. Most traders will ideally desire to see some sort of blueprint or tendency in the stock's price, rather than only wild swings. It's also of import to make sure that the stock also hasn't already wearied the volatility that your strategy depends on.

Finally, a skilful stock scanner needs to be timely. Penny stock prices can modify chop-chop in response to news or even individual trades considering of their low liquidity. Existent-time toll information is absolutely essential. A news scanner tin can help you cut through the dissonance and figure out why specific penny stocks are moving and whether the electric current price is overbought or still has room to run.

Creating Penny Stock Scanners in Scanz

Scanz offers iii ways to scan for penny stocks: using the Easy Scanner, using the Pro Scanner, and using the News Scanner. Nosotros'll take a look at all three to run into what they offer and how you lot can use them to find trading opportunities.

Easy Scanner

The Scanz Piece of cake Scanner allows you to quickly see the penny stocks that are getting the most trading book. That'southward important, since these are the stocks that offering the liquidity you need to enter and exit trades – not to mention they'll generally be less volatile than low-liquidity stocks.

To ready the Easy Scanner to wait for penny stocks, starting time select just the AMEX market and then use the filter settings to set a maximum share price of $5. Then sort by Trades or $Volume – either of these are improve options that Volume, since they reverberate the actual number or trades being placed or money changing hands rather than merely the number of shares traded (which could come from a few big transactions).

If you want to further narrow your scan, you can change the share cost filter, sort stocks by % Change and set a minimum volume filter, or gear up a minimum % Change filter. Go along in mind that the Easy Scanner also allows you lot to slice penny stocks by sector, which tin can be a great mode to act on sector-wide news.

Pro Scanner

The Pro Scanner allows you to create advanced scans that await for a combination of primal parameters and technical setups. Many of the aforementioned scanning strategies that employ to commutation-traded stocks tin also be used on penny stocks, simply remember that calculation a volume filter to your scan will be extremely important.

Some basic filters you can use to build a penny stock scanner are the Markets and Last Price parameters. You'll want to fix Markets to AMEX only and create a filter that limits Last Price to less than $5. Utilize the $Volume or Trades filter to set a minimum trading book or to look just for stocks that are trading above their average daily volume.

From in that location, your options are virtually unlimited. The % Alter filter tin exist a good place to start to find stocks that are moving on the twenty-four hours – and to exclude stocks that have already fabricated such large moves that they're likely exhausted. Y'all tin also use moving averages to spot stocks that are prospective breakouts or that are about to trigger a moving average cross.

Putting all that together, let'southward look at a bones bullish scan that focuses squarely on the "safest" penny stocks in terms of liquidity and volatility:

Concluding is less than VALUE 5

AND

DAY'S $VOLUME is greater than VALUE 100,000

AND

Simple Moving Average (1m, 10) is greater than ANALYTIC Simple Moving Average (1m, 50)

AND

Percentage Change is between 4 AND xx

News Scanner

The News Scanner is a great style to go along abreast of news that could affect the toll of penny stocks. The filter parameters in this scanner work similarly to the Easy Scanner – you'll start out by selecting just the AMEX market and placing a cap of $5 on the Electric current Cost filter.

From there, you tin enter your own keywords to narrow your search. This is a neat way to look for news around specific sectors or specific companies on your watchlist. Alternatively, y'all can use keywords that target products, trends, or fifty-fifty major companies that may be competitors to notice new penny stocks to merchandise.

Don't forget to check the Deal News tab, either. Y'all tin't filter this co-ordinate to stock cost, but you tin sort the news co-ordinate to Last share price to quickly notice penny stock news. Deal rumors can trigger massive jumps in share prices, merely be careful since not every G&A rumor turns out to be truthful.

Conclusion

Trading penny stocks can be risky, but for aggressive traders these pocket-sized-cap companies offer potentially big profits. Part of the play a joke on to trading penny stocks is to find the companies that are reputable, take enough liquidity to enable smooth trading, and are poised for big toll movements. With the Easy, Pro, and News scanners in Scanz, you lot can more hands spot penny stock trading opportunities and build a strategy for success.