How to sell penny stocks
How to Trade Penny Stocks For Beginners: Class 1 of 4 by Ross Cameron
what's up everybody all right so today
we're going to talk about day trading
terminology and the term of the day is
penny stocks and how to make a living
trading penny stocks now this is a
question that a lot of traders asked me
when I first started trading I
gravitated towards penny stocks and why
would that be it's because I didn't have
a lot of money and I didn't think I
could afford to buy stocks like Apple
Microsoft you know Caterpillar and I
also figured that if I was trading
stocks like that you know most mutual
funds they only make five maybe ten
percent in a single year so trading a
stock like Apple you know with a $5,000
account 10 percent is 500 bucks
I'm not going to spend all my time to
make 500 dollars in a single year I need
to be making 500 dollars a day so that
meant that I needed to focus on an area
of the market that was a lot more
volatile and that I thought had more
potential and so I thought penny stocks
you hear about people who have traded
penny stocks and made hundreds of
thousands of dollars and so I thought
maybe that was the place to go well I
didn't realize when I first got started
how long it would take me before I would
find any success as a trader took me 18
months of trial and error and I lost
over $30,000 during that time in my life
it was very frustrating I kept losing
and losing and losing in fact only 10
percent of the traders out there who try
to trade the markets will be profitable
so you know for me at this point I've
now gotten over that learning curve and
so what I'm going to talk about today
are a couple of the different tiers of
penny stocks and how you configure which
ones are higher risk and which ones are
lower risk
so why should you listen to me well I'm
a trader who in the last 12 months has
made over two hundred and twenty
thousand dollars trading stocks and a
lot of those stocks were penny stocks in
fact during the summer of 2016
I made ninety four thousand one hundred
and nineteen dollars trading stocks and
many of them again were penny stocks at
the end of the summer I did an interview
in that interview appeared on The
Huffington Post you can see I verified
all of these trades with my broker
statements to show you that the trades
are real and the gains are real that
article here on The Huffington Post you
know was about the three
that I spent trading the markets this
for me was a you know a great stretch it
was a really great hot streak and really
all of this is to say that I am someone
who trades the market profitably and I
figured out a way to make a living
trading stocks and many of the stocks I
trade are penny stocks all right so the
most important thing for you to
understand is how to differentiate the
high risk penny stocks from the low risk
penny stocks and of course all of this
is relative day trading is riskier than
long-term investments but a lot of us
come into the market knowing that
there's more risk and and looking for
that you know risk to reward potential
I'm willing to risk money to make money
and this year I've done really well
alright so what are penny stocks well
the SEC considers penny stocks to be any
stock trading under three dollars per
share and that's why a lot of the stocks
I trade would be considered penny stocks
because they're between a dollar fifty
and three dollars I personally focus on
trading stocks between a dollar fifty
and ten dollars so that means some of
the stocks I trade technically are penny
stocks even though they're not penny
stocks in the literal sense in the
literal sense a penny stock of course
would be a stock trading below one
dollar and these are generally some of
the riskiest stocks to trade in the last
12 months the 220,000 dollars I've made
has come not from stocks trading at 10
cents 20 cents but from stocks trading
between $1 and 10 dollars and many of
those would be considered penny stocks
all right now we'll talk a little bit
about the different exchanges that penny
stocks trade on some of them trade on
NYSC Amex and Nasdaq exchanges but most
of them don't all right the National
exchanges require all stocks to trade
over $1 now if a stock falls below $1
for a period of time that's fine they'll
get a notice saying you gotta get your
stock back up above $1 and if they can
then they continue to trade on that
exchange if they can't well then they
risk getting delisted so let's take a
look at some of the stocks that I've
traded over the last few months this is
a stock AVO that went from $1 80 up to 3
dollars and 60 cents in one day versus
the previous day's close this went up
over
a hundred percent and this right here
was a listed stock this is on the
National exchange this was easy to trade
lots of liquidity millions of shares of
volume easy to buy easy to sell and
there are traders who easily made tens
of thousands of dollars trading the
stock on this particular day we trade
the simple patterns the first pullback
right here the second pullback right
here here's another stock again from a
dollar ten to two dollars in one day a
100% intraday move so this is to say to
find big percentage gains you don't need
to look at penny stocks in the
traditional sense of being under a
dollar you can get big percentage gains
from stocks trading between one and ten
dollars all right and again the entries
here are very simple the first pullback
and the second pullback here's another
stock from four dollars up to six
dollars and 20 cents right off of our
high o day scanners we use these
scanners to search the market for stocks
that are moving up quickly and whenever
I see that I look for an entry this
entry here was at 4:50 at right after
that little red candle the first candle
to make a new high o is my entry and
we've got the move all the way up
towards 620 again an opportunity to make
easily tens of thousands of dollars and
if you find a couple trades like this
each week you're going to do really
really well
here's another stock from about 340 up
to 433 clean flat top break out over $4
and then first pullback here from 418 up
to 433 simple patterns we teach these
patterns and trade them every single day
in the chat room here's another stock
from a dollar 40 up to 308 a 100%
intraday move this for me represents an
opportunity right the only question is
whether or not you have the skill to
capitalize on this type of opportunity
when it presents itself we see stocks
make these kind of moves day in and day
out here's a stock that went from two
dollars to six dollars and 80 cents in
one day look at that I mean that's an
incredible opportunity and these entries
are not that hard
the first pullback and the second
pullback there's four thousand three
hundred and ninety dollars in profit in
one day that right there is more than
most Vermonters make an entire month so
to be able to do that in one day and
really
in just the period of about an hours is
pretty impressive that's the potential
of the market that for me is the
potential of trading small cap stocks
this is a penny stock in the definition
you know buy based on the SEC definition
it's started below three dollars and
look at the move it made this is a stock
that I felt comfortable trading with
large size this is not a company that's
you know pending bankruptcy or trading
it you know one or two cents per share
stocks that are trading at one or two
cents per share generally speaking are
some of the worst companies on the
market if they were good companies they
wouldn't be trading at such a low price
here's another one moved from two
dollars up to nine dollars in one day
right that's pretty crazy
we asked some of the traders in our chat
room whether or not they were profitable
on this trade my entry was at 250 and 86
percent said yes you can see here that
the first move up entry at 250 pullback
here another entry over $4 for the move
up into $9 per share so these are these
are trades where you could go in with
10,000 20,000 30,000 shares and some of
the most talented traders will easily
make hundreds of thousands of dollars in
these types of moves and they only need
to do that a couple times a year to be
very very successful
here's another stock this is a little
more expensive from $12 up to $19 all
right so this is to say that we see
these opportunities all the time in the
market and the biggest thing I want to
encourage you is to you know just to let
go of that thought to trade profitably
you need to trade literal penny stocks
you don't need to trade stocks priced it
you know one to three cents per share in
order to make money trading the markets
now penny stocks this is an important
thing the minimum tick rule will affect
penny stocks so stocks that trade over
$1 trade in one penny increments and you
can see here this is a stock that'll
trade I mean it has a bigger spread
right now but it can trade in increments
as small as one penny so it could be a
381 by 382 or something like that
well when stocks trade under $1 they
trade in four they've got four decimals
though so they trade in one hundredths
of a penny which is
pretty crazy all right so that means an
80 cent stock might look like this point
eight one nine nine this $0.26 stock is
26 by twenty six to seven all right so
this further breaks down the penny
stocks and this is for the simple reason
that you know if you had a a penny stock
trading in a one penny spread the spread
would become a very large percent right
a stock trading one cent by two cent has
I can go up a hundred percent just as
soon as it goes up one tick so this
creates a little bit more market depth
it allows for more buyers to line up in
between each penny in fact it allows a
hundred places for them to line up in
between each penny now I prefer
obviously to trade stocks above one
dollar so the stocks that I'm trading
they all have your typical 1 cent spread
in 2001 the market underwent
decimalisation and before that stocks
traded in fractions so when we had
decimalisation that really changed the
market a lot because instead of having a
minimum spread of six point two five
cents the smallest spread went down to
just one penny right so when you had
spreads of a quarter you had twenty five
cent spreads you had spreads of 1/8
there was a 12 point 5 cent spread you
have trade you have spread of 1/16 it's
a six point two five cent spread all
right so now the spreads are much
tighter and that means that buyers and
sellers can get stacked up on both sides
and you can see here it would actually
take a lot for this to move all the way
to 27 cents because of all the sellers
that are lined up in the 100 places
between 26 and 27 so for that reason I
actually don't feel that most of these
penny stocks will move as quickly as
stocks like this priced above a dollar
these will move faster look at this can
move from 81 3 81 to 386 almost
instantly right it would take a very
very long time for this to move 5 cents
now there are a couple different
exchanges where penny stocks will trade
yes
some penny stocks are on NYSC and Nasdaq
these are
docks that have fallen below $1 per
share you know there is the requirement
that all of the stocks on the NYC and
Nasdaq trade above $1 per share but if
the company's shares fall below $1 for a
period of time and then come back up
above it you know it's it that mean
nothing might happen it might just be
fine
but if the company stays below $1 for a
long enough period of time they can
receive a delisting notice from the
exchange and what they're saying is that
if your stock isn't above $1 by this
date you're your company's going to be
pulled off the exchange you're going to
get delisted and you're going to be
moving to the OTC exchange that's really
the opposite of growth it's not a good
thing for the company they don't want to
get delisted so there are a couple
different things they can do they can
try to perform well and have the stock
get priced above $1 if that doesn't work
well they can do a reverse split a good
old reverse split and we see this all
the time with small cap stocks this is a
this is one that's been particularly
ridiculous GBS n with all the reverse
splits it would actually be priced up
here at 43,000 dollars per share at the
high of the spike but you know what when
it and right now it's trading it one
penny it keeps dropping down and they
keep doing a reverse split so how does
that work well if a stock is trading at
50 cents and they do a ten to one
reverse split let's say you're holding
10,000 shares at 50 cents they're going
to take that 10,000 shares and they're
going to turn it into a thousand shares
priced at five dollars okay so all of a
sudden your 10,000 shares turned into a
thousand and you're holding the stock
now at five dollars
so in effect nothing really happens it's
the price hasn't really changed it's
just changing the outstanding shares and
adjusting the price right shareholders
value hasn't changed but the price the
stock has changed to keep it above the
$1 minimum and to keep it in compliance
of course if the stock then goes from
five dollars back down to a penny they
got to do a reverse split again and they
do that again and again and again and
that's why you end up seeing stock
charts like this that just keep going
lower and lower and lower and lower all
right now eventually this stock may not
be able to do another reverse
split and they may get delisted all
right and they will probably move to the
OTC market so once the stock has been
Dilys delisted it will move to the OTC
market although oftentimes
stocks will list on the OTC market and
never appear on national exchanges like
NYSC or Nasdaq because they don't they
can't meet the requirements
all right the requirements to be on
either of those exchanges are really
high they have to be fully transparent
they have to show their earnings the
accounting and all of that stuff but
with the OTC market
well regulations are you know there's
still some regulations but the
requirements to get listed are a lot
lower now in recent years the OTC market
has changed a lot especially in the
quoting system it's made the electronic
quotes available on most stocks so
liquidity has improved but in the past
liquidity and order execution times were
very slow compared to NYSC or Nasdaq so
you know the OTC exchanges may have a
combination of electronically quoted
exchanges but also broker-dealer
networks that aren't even listed so as a
result you know the OTC markets are not
as transparent for traders or investors
and that means the risk has increased
the risk is going up all right now there
are several tiers of the OTC market and
those tiers help traders understand the
type of stock they're trading now these
tiers separate the companies that are
you know not great to the ones that are
like really bad when it comes to
providing disclosures providing earning
statements and meeting the the
requirements to be listed these are the
three tiers of the OTC Markets you've
got the OTC QX which is the best market
then you have the oTCQB which is the
venture market that's the so-so and then
you've got the Pink Sheets right the OTC
pink and these are the rest of the
stocks they don't meet the otcqx and
they don't meet the oTCQB standards and
they're also subdivided into categories
of
kind of like crappiness I mean some of
them are really really bad and this is
where a lot of stocks become subject to
manipulation if someone wanted to
manipulate the market they would most
likely use an OTC stock all right and
we'll talk about that more in a little
bit now the important thing to
understand is that the OTC QX the best
market this is the sort of the highest
quality of OTC stocks they do have to
meet pretty high financial standards
they have to follow best practices they
have to maintain compliance with you
know securities laws and government
agencies and stuff like that
and you know these are supposed to be
some of the best stocks on the OTC
market now the venture market is the
sort of development stage and these are
stocks that aren't able to qualify for
the best market but are still doing
reporting undergoing annual verification
and you know they're meeting some
standards of transparency in the in the
hope that they will move up to the best
market these companies also must meet a
minimum price of one penny right and
they can't be bankrupt they can't be in
bankruptcy now the pink sheet stocks are
you know these are also subdivided into
categories and essentially the important
thing to know here is that any stock
that is listed in the Pink Sheets is
going to be a stock that doesn't have
and doesn't offer a lot of transparency
and we really might not know a lot about
the company how much they make their
total net worth how many employees they
have and stuff like that now the fourth
tier of the OTC market is the OTC gray
market and this is I guess even lower
than the Pink Sheets and the pink
markets this is where stocks are not
able to publicly quote the OTC
securities so they're not even being
publicly quoted and they're not going to
be electronically traded so for the most
part we wouldn't even see them which is
why I didn't include them on this
in the images there all right so now
traditional penny stocks right
traditional penny stocks would trade
between a penny and 99 cents right
that's a penny right so it's a penny
stock
well they continue to trade any
increments of 1/100 of a penny and you
know as long as they continue to trade
above 1 penny they will be traditional
penny stocks and you may see them on NYC
and Nasdaq exchanges from time to time
so you know if they haven't received
delisting notice yet but some of those
companies they may be near feet facing
bankruptcy they are not in very good
financial standings otherwise their
stock would not be priced at you know a
penny or two pennies or whatever it
might be so generally speaking they are
among some of the weakest stocks in the
market and they very rarely represent
good investment opportunities so that's
not something that I would trade those
are not the type of stocks that I traded
to make two hundred and twenty thousand
dollars in the last twelve months now
when you look at penny stocks I always
have my level two quoting just in two
decimals because I don't trade the sub
pen or the sub one dollar stocks but you
can see here these two stocks are listed
on national exchanges and so you can see
Nasdaq as a market maker right here and
you can see let's see this one will have
well it's got bats it's got ARCA it's
got edge so you know both of these
Nasdaq is here on the side both of these
are listed whereas these two stocks are
on the OTC exchange so you're not going
to see NY IC or Nasdaq as market makers
creating the market you're going to see
a different group of you know broker
dealers and market makers providing the
market for these stocks and sometimes
you'll recognize that one of these guys
is almost completely controlling the
price action that's part of the
manipulation that we can see in the OTC
market where one market maker one broker
is really controlling the price now this
is a sub penny stock so any stock
trading below a penny right now this the
stock is trading between a tenth of a
penny and
nine tenths of a penny so it's a sub
penny stock it's just below a penny but
it's not it's not one hundredth of a
penny it's a tenth of a penny and you
can see here the sub penny stocks you've
got the two decimal points the two zeros
and then now we're at 1/100 of a penny
all right you can see these stocks for
the most part their charts are almost
unreadable very very little price action
very little volume the only time these
usually get volume is when a message
board or something like that starts kind
of promoting the stock or pumping them
up it's not something that I would ever
trade and then you've got the trip zero
stocks
all right this these are the stocks that
are trading in one hundredths of a penny
these stocks are priced between 0.01 so
the triple 0 and 0.0 0.4 so as you can
imagine these types of stocks are often
used for manipulation because if a stock
goes from point zero zero zero one up to
point zero zero zero two it moved up 100
percent so many of the quote unquote hot
penny stock alerts are on sub penny
stocks or trip zero stocks and they
primarily benefit the people who first
bought the stock let's just say for
instance someone buys a hundred million
shares of the stock at point zero zero
one that's ten thousand dollars one
hundred million shares but it's only ten
thousand dollars well if the stock goes
up to point zero zero one it's actually
gone up enough for them to make a
hundred thousand dollars if they put in
a hundred thousand dollars it would go
up enough for them to make a million
dollars and that's why you see a stock
promotion and you know the pump and
dumps in this price range because it
doesn't take a lot for these to move up
significantly having said that these
rarely have the liquidity to buy a
hundred million shares and who wants to
do that right I certainly don't and this
is why traders who really are making a
living in the market are never trading
these stocks they look like this right
and look at how many shares you have on
either side this traded three hundred
million shares
day but this is what the price looked
like all day long right there's nothing
to trade here you can't trade this now I
actually saw this stock because I saw it
was on message boards is getting you
know promoted a little bit and you know
people are saying oh it's going to go
back up it's like give me a break I mean
is it really going to go back up this
thing is at the bottom of the barrel I
guess it has nowhere to go but up but
this is not something I would ever put
my money in and the other place it could
go is delisted gone bankrupt and the
money's gone alright so I have found in
my years of trading that I can reduce my
risk in the market by focusing on stocks
listed on NYC on NASDAQ Amex real stocks
real companies and those are stocks that
they're going to face the requirements
to put out earning statements to be very
transparent they're less likely to be
used as vehicles for this type of
manipulation that you see in the
sub-zero and triple zero sub penny and
triple zero penny stocks okay now as you
can see from you know some of these
charts and and also some of the charts
of the stocks that I traded earlier you
know being a profitable trader you don't
have to trade traditional penny stocks
you can trade stocks price between $1
and $10 and you can do really well I had
an account in one month that I grew from
a thousand dollars to eight thousand six
hundred and fifty three dollars and it
wasn't trading penny stocks in the
traditional sense it was trading stocks
between $1 and $10 per share right
that's a 760 percent gain and I didn't
have to worry about buying a million
shares of a you know stock priced at one
penny I feel comfortable putting my
money into these stocks and the other
thing that you have to realize is that
for me this is a strategy that's
scalable because I know when I'm trading
stocks that are liquid I can buy and
sell larger amounts of size you know
when you have a stock let's say like a
koa or a kao this is a stock that in the
last few weeks has gone from you know
five dollars up to sixteen dollars it's
a 300% move it's on millions and
millions
shares of volume so this is a very very
liquid stock now for me I may only buy
5,000 or 10,000 shares but other traders
who are maybe have bigger accounts than
me they might feel comfortable taking 50
thousand or a hundred thousand shares
and on those types of moves they could
make four hundred or five hundred
thousand dollars and they're doing it in
a 100% legal way a 100 percent ethical
way trading a stock that's simply strong
because it has a catalyst and you could
never do that
trading penny stocks so if you learn how
to trade the stocks between $1 and $10
and you can be profitable if you can
make $20 a day and then scale that up to
50 and then a hundred and then 200
you're on the same path as me that's
what I did I start with 100 a day built
it up to 200 next thing I know it was
four hundred five hundred and now on my
best days I make five maybe even ten
thousand dollars to the point where I
made ninety four thousand dollars over
the course of three months trading
stocks like this you know a stock that a
couple weeks ago was priced as a dollar
ninety one big news surged up to five
dollars pulled back a little bit
squeezed up to six dollars that's like
five six hundred percent game and we see
this happen all the time right so you
can make a living trading penny stocks
but it doesn't have to be the the sub
the sub penny the trip zero stuff you
don't have to mess around that stuff I
don't know a single profitable trader
who trades those types of stocks alright
so if you're thinking about trading
penny stocks make sure you step back a
little bit and you think about the big
picture the big picture is that if you
want to build a career that you can
potentially be doing for the rest of
your life and I say this we've got a
student who joined our room
just this week who's 81 years old he's
been trading this is his career he's
been doing this his whole life you can
do this for the next 30 40 50 years of
your life so set the foundation that's
scalable and for me that's based on
trading stocks between $3 and $10 and
then if I want to trade stocks between
$10 and $30 now I've got the account
size to do it and the same principles
apply so I can trade a stock like you
know Tesla or I can trade in a Nvidia
this is a higher price stock but you can
see this is this is a pretty strong one
today
and it had a lot of opportunities so you
know once you've built up your skill now
you build up your account and you can
scale the strategy to any price range
and then next thing you know you are
buying Apple IBM and Microsoft and
you're trading the strongest stocks on
the market all right guys so I hope this
has helped you understand penny stocks
if you have any questions I'd love to
have you comment below I'll make sure to
come back and answer them
as soon as I see them all right thanks
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