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How to Trade Penny Stocks in 2025? A Definitive Guide

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Written by Timothy Sykes
Updated 2/12/2025 54 min read
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Let’s be real. You probably found this post by googling something like “how to get rich quick trading penny stocks.” Or maybe you watched “The Wolf of Wall Street” and got intrigued.

Sorry. You won’t get rich quickly in this niche. But I can show you what’s possible with the right rules. And I can teach you what I’ve learned from more than two decades in the stock market.

First, let me answer a big question…

Table of Contents

Why Learn From Me?

artificial intelligence stocks what to expect
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I’ve made millions trading penny stocks. That’s not typical. But other traders have followed in my footsteps…

In the past few years, several young traders who have been through my Trading Challenge hit big trading milestones.

Do I have your attention? Good. Let’s talk about one of the most hated — and misunderstood — trading styles out there: day trading penny stocks.

Penny Stocks Trading Essentials for 2025

It sounds counterintuitive, but forget about the money when it comes to trading penny stocks. Instead, focus on these three keys first — Let’s look at each more closely. knowledge, preparation, and experience.

#1. Build Your Knowledge Account

To become a top trader, you must focus on your education first.

I always say to build your knowledge account first. The money can come once you have the right foundation.

Penny stock trading isn’t about investing in value stocks. Their revenue means next to nothing to me — so does all the content that analysts produce.

I don’t care about their dividends or other forms of compensation they offer. Penny stock trading isn’t about accruing interest on your money…

It’s about recognizing patterns, trading with discipline, and building solid trading plans.

How do you do that? That’s where Step #2 comes into play…

#2. Prepare, Prepare, Prepare

My strategies involve trading the most volatile stocks in the market. You must come prepared.

See how I prepare for every trade here. 

Then, go through my “Trader Checklist Part Deux” guide. It explains, in detail and with examples, the seven indicators I use for every trade.

#3. Gain Experience

You can’t gain enough experience if you can’t stay in the game. Unfortunately, most traders blow up their accounts before that happens.

No matter how much you study, you need screen time and trade time. So I suggest new traders start small and size up over time. Learn to take singles and cut losses quickly. Focus on the process.

You can also start with paper trading. Platforms like StocksToTrade (which I helped design) have paper trading simulators for practice.

All successful traders have go-to patterns and practice risk management. They established that through experience.

Top tip: All my top students studied and practiced for years before finding success.

Ready to dig in?

4 “Secrets” to Profit With Penny Stocks in 2025

jack kellogg and sykes in italy
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First of all — there are no secrets when it comes to trading. Becoming a self-sufficient trader requires hard work, patience, and a bit of grit.

Here are the trading pillars I teach my students…

Use Technical Analysis

Get intimate with candlestick patterns, trend lines, and resistance levels. Utilize articles and data to strengthen your understanding. This isn’t fortune-telling — it’s about recognizing patterns and making informed decisions.

Stay Informed With Market Trends and Trending Industries

Knowledge is power. Read, watch, absorb. Whether it’s oil and gas or the next hot tech trend, stay updated. Subscribe to a reputable newsletter and use it.

Implement Effective Risk Management Strategies

Set strict stop-loss positions. Never risk more than you can afford to lose. This isn’t just advice — it’s survival.

Cultivate a Strong Trading Mindset

The biggest enemy you’ll face is between your ears. Trading is an emotional game — don’t let fear or greed control you. Patience and discipline are your allies.

Penny Stocks and Penny Stock Trading: Definitions

Despite the name, ‘penny stock’ actually refers to a stock trading at under $5 per share.

Yes, they can trade for fractions of a penny, but a $4.95 stock is also considered a penny stock.

Pennystocking as a verb means trading penny stocks. Sometimes it follows the same trajectory as buying and selling regular stocks of large-cap companies like Google or Amazon.

But the percent change of large caps is too minimal for me. I want big price swings!

Pennystocking is a unique trading style that requires a specific strategy and mindset. While penny stocks are often associated with high risk, they also present unique opportunities for day trading. The volatile nature of these stocks can lead to significant gains if traded correctly. It’s crucial to understand the market dynamics and develop a solid trading strategy — here’s how you day trade penny stocks!

How Penny Stocks Work

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What if I told you I don’t believe in any of the penny stocks I trade?

I know. It’s cynical and counterintuitive.

Generally, people think trading is about finding a company to believe in, then buying and holding its stock for years.

Penny stocks are the opposite. Most of them eventually fail. But before they fail, they can experience massive spikes.

Because of their small size, these companies feel the impact of certain news catalysts in a big way.

Trading penny stocks is not just about buying low and selling high. It’s about understanding the market, analyzing trends, and making informed decisions. A well-defined strategy can make a significant difference in your trading outcomes.

Here’s how I find penny stocks pre-spike.

Who Should Invest in Penny Stocks?

Penny stocks, typically traded outside of the major stock exchanges and often valued at less than one dollar per share, present a unique landscape for traders. These stocks are suited for those who are willing to embrace significant risks for the possibility of substantial rewards. They’re particularly appealing to speculative traders who have the capacity to closely monitor market fluctuations and make swift decisions based on evolving stock dynamics. For beginners, while the allure of quick gains is tempting, the volatile nature of penny stocks demands a well-prepared strategy and an understanding of the risks involved. In my years of teaching, I’ve seen eager novices burn quickly without the right preparation—understanding the market’s pulse through comprehensive trading platforms and real-time data is crucial.

For those looking to get into the world of penny stocks, mastering technical analysis is crucial. This analytical method provides a framework for making informed decisions by studying historical market data and stock price movements. Technical analysis can particularly enhance trading strategies for highly volatile markets like penny stocks, where it’s essential to predict trends and reversals. To get started, familiarize yourself with the fundamental concepts and tools of technical analysis tailored for penny stock investments. Learn more about technical analysis to refine your trading strategies.

Benefits of Penny Stocks

Why are investors drawn to penny stocks? There are a few reasons…

Reason 1: Can Buy Many Shares at a Low Price

These aren’t blue-chip stocks. We’re talking a few bucks, sometimes pennies per share. The entry barrier is low, and the upside can be significant.

Reason 2: Easy to See Gains

Penny stocks are volatile. While this presents risks, it also provides the opportunity for rapid gains.

Reason 3: Possible Price Growth

Imagine getting in on the ground floor of the next Apple. It’s a long shot, but the possibility is enticing.

Reason 4: Little Competition for Shares

Unlike well-known stocks, penny stocks have less competition from institutional investors.

Reason 5: Can Begin Trading with a Small Account

You don’t need a hefty bank account to start. This is where many investors cut their teeth in the stock market.

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How Do Beginners Buy Penny Stocks?

Beginners looking to trade penny stocks need to focus on understanding stock prices, stock data, and stock market charts before making any moves. Penny stocks are known for their stock volatility, meaning share prices can shift rapidly. A trader must recognize penny stock patterns and penny stock indicators to determine when a stock move has real momentum versus when it’s just hype.

Stock market day trading in penny stocks is all about discipline. Many traders jump in without a plan, chasing stock momentum without considering the risks. That’s a fast track to stock losses. I teach beginners to focus on small-cap investments with clear penny stock market patterns rather than blindly following stock market offers from promoters. Trading success comes from preparation, not luck.

Trading Penny Stocks For Beginners

For those new to the trading scene, penny stocks might seem like a fast track to significant returns, but this sector requires careful navigation. Beginners should start by familiarizing themselves with the market’s functioning, focusing on over-the-counter markets where many penny stocks are traded. Using reliable stock screeners can help filter out potential trading opportunities based on specific criteria such as market capitalization and trading volume. Interactive Brokers or other well-regarded brokerage platforms offer tools that cater to novice needs, providing essential insights without overwhelming commissions that can eat into profits. Starting with a small amount of funds and gradually increasing exposure as you gain more experience and confidence can be a prudent approach to trading in this high-stakes market.

Understanding which penny stocks are gaining momentum can provide a significant advantage. Start by exploring lists of potential high-growth penny stocks, which can give you a sense of where to focus your initial investments. This approach can help mitigate some of the risks associated with penny stock trading by directing attention to stocks with potential for returns.

Here’s my current list of the top penny stocks to watch!

Penny Stocks & News

The connection between penny stocks and market news is tighter than in more stabilized markets. Due to their low price and lower market capitalization, penny stocks can be significantly impacted by press releases or news stories—swinging dramatically in price with the publication of news. Traders need to stay alert and keep an informed eye on relevant financial news sources that could affect stock prices. This means not just passively watching the markets but actively seeking out news that could signal potential movements. Engaging with financial news platforms can offer the timely insights needed to capitalize on these movements, turning information into profitable trading opportunities.

High-Volume Penny Stocks

Trading high-volume penny stocks can be a strategic move because it typically indicates better liquidity, making entry and exit more manageable without dramatically affecting the share price. Stocks that consistently show high trading volumes are less likely to be subject to price manipulation, which is a common risk in the penny stock arena. Monitoring these volumes can provide a snapshot of market sentiment and potentially uncover momentum before major price moves occur. Utilizing advanced trading platforms that integrate real-time volume analytics can significantly enhance the decision-making process, allowing traders to act quickly on high-volume signals.

Keeping the hype in check is crucial for trading high-volume stocks. A trader’s mindset plays a critical role in navigating the highs and lows of the market effectively. Strategies for developing a resilient trading mindset include setting realistic goals, maintaining discipline, and learning from both successes and failures. These mental strategies are essential for long-term success and can help traders make more calculated and confident decisions under pressure. Check out these mindset strategies that can help you maintain focus and drive in the volatile penny stock market.

Trading Penny Stocks With Low/High Floats

The ‘float’ of a stock—referring to the shares available for public trading—significantly impacts how penny stocks perform. Low float stocks can be particularly volatile, with price swings magnified by even a relatively small number of shares being bought or sold. Conversely, high float stocks tend to be more stable, though they can still offer good trading opportunities with the right market conditions. Understanding how the float affects stock performance is key, and using detailed stock analysis tools to review these figures can guide your trading strategies effectively.

Best Penny Stocks to Watch in 2025

The market went straight up supernova after Donald Trump’s election victory in November 2024, creating fresh volatility across the financial markets. The entire market surged after the election, and traders are watching stock gainers in multiple sectors. Penny stock volume has spiked, especially in sectors benefiting from Trump’s policies.

Financial stocks are seeing strong stock momentum, as big banks prepare for deregulation and increased mergers and acquisitions. Tech stocks are also showing stock market breakout potential as artificial intelligence investment ramps up — although the Chinese AI startup DeepSeek and NVIDIA CEO Jensen Huang’s comments about quantum computing’s development pipeline being a long way off have complicated matters.

Here’s my list of Quantum Computing Stocks to watch!

On the flip side, automakers and construction companies face uncertainty due to shifting policy changes, and Trump’s latest tariffs are shaking up steel and aluminum stocks. Tariff-driven stock market volatility creates trading opportunities, but traders must approach these setups carefully. Stocks that benefit from tariffs may spike, but any shift in policy could trigger fast reversals. Traders should monitor stock market indicators closely to avoid stock losses in these fast-moving plays.

Other sectors have also been picking up. Short squeezes are back on the market’s radar. Biotech stocks are hot as always.

My students and I stay prepared. When the market provides opportunities, we’re ready.

I earned $323k in 2024 by trading overly cautious. My top student Jack Kellogg banked $3.1 million.

Things can heat up at any time. Are you ready?

Top Penny Stocks by Stock Exchange

OTCs are my favorite penny stocks to trade. But you can find penny stocks on the NYSE, Nasdaq, and AMEX, too. Below are the top penny stocks I’m watching, by exchange.

Top 5 NYSE/AMEX Penny Stocks

Top 5 Nasdaq Penny Stocks

Top 5 OTCQB/OTCQX Penny Stocks

Top 7 OTC Pink Sheet Penny Stocks

Sign up for my no-cost weekly watchlist here.

Examples of Recent Penny Stock Runners

One reason I love penny stocks is their ability to spike — 100%, 200%, or even 300% in a day.

The three stocks below are examples of recent penny stock runners.

Keep in mind I don’t consider any penny stock company to be a good long-term investment. To me, penny stocks are trading vehicles. So as you study these recent penny stock runners, notice how fast they can fall, too…

BigBear.ai Holdings Inc. (NYSE: BBAI) — The AI Penny Stock That Signed a Government Contract

BBAI is an AI stock breaking out to new highs after locking in a government contract.

Check out my full AI Penny Stock Watchlist here!

Government deals can be massive catalysts for penny stocks, and this one is no exception. On February 4, BBAI announced a contract with the Department of Defense to prototype an adversary geopolitical risk analysis for the Chief Digital and Artificial Intelligence Office (CDAO).

Why traders are watching BBAI:

  • Huge breakout past 52-week highs, showing strong momentum.
  • AI is one of the hottest sectors, and government contracts add credibility.
  • Less selling pressure from bag holders, as anyone holding above previous highs is now in profit.

This is the type of setup traders look for—a strong catalyst and a chart with a history of big moves.

Aurora Cannabis Inc. (NASDAQ: ACB) — The Cannabis Penny Stock That Nailed Earnings

ACB has a history of spiking, and its latest earnings report gave traders another reason to watch.

Check out the latest Aurora Cannabis news here!

In the past, ACB has seen massive price surges—140%* in September 2023 and 220%* between March and April 2024. Now, after announcing 37% revenue growth in its latest earnings report, it’s back on the radar.

Why traders are watching ACB:

  • History of big spikes, proving it can move fast.
  • Holding onto earnings gains, a bullish signal.
  • Potential for a continuation play if it breaks key resistance levels.

Cannabis stocks are volatile, and ACB is no exception. But for traders who know how to time their entries, these setups can offer solid opportunities.

Quantum BioPharma Ltd. (NASDAQ: QNTM) — The Quantum Hype and Sober Sectors Collide

Quantum BioPharma Ltd. (QNTM) isn’t a quantum computing stock—it’s a pharmaceutical company. But in penny stocks, companies often add “quantum” to their name to generate hype.

These are the top Biotech Stocks on my radar!

Why traders are watching QNTM:

QNTM is a great example of how penny stocks can explode on news, but timing is everything.

* Past performance does not indicate future results

Breaking News is my go-to weapon for finding plays. It alerts me to important news articles in stocks and the overall economy, giving me a crucial trading edge. The things it spotlights range from new products to photos of officials doing noteworthy things…

Roughly half of my recent trades have been direct effects of Breaking News.

Get a 14-day trial of Breaking News Chat here — only $17!

How to Buy and Sell Penny Stocks Online?

Penny stock trading is done through online brokers, but not every platform offers the same access to stock market day trading opportunities. Some brokers limit stock market scalping or restrict access to OTC stocks, which can be a problem for traders looking for high-potential stock market breakout plays. A solid broker should provide stock data, stock market indicators, and stock market strength for analysis.

Knowing when to buy and sell is just as important as picking the right penny stock. Penny stock momentum can be fast, with prices surging and crashing within minutes. A trader must understand penny stock market risk and use a structured strategy to capture stock market profit while cutting penny stock losses quickly. Trading without a clear sell plan is a mistake. I always remind traders: a trade isn’t successful until you take your profits.

Is Trading Penny Stocks Illegal?

Trading penny stocks is completely legal.

But penny stocks can be super shady.

Yes, some trade on big exchanges like Nasdaq. But many trade through OTC (over-the-counter) exchanges.

There’s a world of difference in terms of standards between OTCs and Nasdaq- or NYSE-listed stocks. The regulations aren’t as stringent for OTCs, which means there’s more potential for fraudulent behavior.

Here’s the thing … As a penny stock trader, this can work in your favor.

There are a ton of schemes around penny stocks, like pumps and overhyped promotions … Your job is to see through them and take advantage of the short-lived spikes they can create in the market.

I know the general public frowns on this niche. I’ve actually had people back away from me upon learning what I do for a living. I chalk it up to ignorance.

Trading is different than investing. In investing, people mitigate risk by diversifying their portfolio — buttressing the riskier picks with more conservative investments like dividend stocks. They can provide a steady income stream and reduce your overall risk. Learn more about this approach in this guide on investing in dividend stocks.

There are legitimate and legal ways to profit in penny stocks. But you MUST…

Know the Rules: Penny Stocks and the SEC

The SEC’s rules for penny stocks vary.

Listed stocks (NYSE, Nasdaq, etc.) have strict listing requirements.

Stocks trading on the OTC markets don’t have as many requirements. Pink sheet stocks have just one: register a Form 211 with the OTC Compliance Unit.

That’s why it’s a buyer-beware market and why I get in and out of trades on these stocks quickly.

I don’t invest in penny stocks — never hold and hope.

The Right Way to Start Trading Penny Stocks Today

Never believe that these tiny companies will change the world. You’ll decimate your account when the stock inevitably crashes and burns. I know from personal experience. (More on that in a bit.)

Sure, a penny stock could turn into the next big thing. But it probably won’t.

So what’s the right way to trade penny stocks?

Expect the worst. Know that most of these companies won’t succeed … but they could experience some huge spikes before they fade into oblivion.

There are two broad strategies to trade penny stocks: long or short.

Is This Penny Stock Trading Guide Right For You?

Tim Sykes checking his top penny stocks list in Italy
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Again, this guide isn’t for people who want to get rich quickly.

No matter what some jerk says in a YouTube ad, there are no guarantees in the stock market. For every person who gets rich, hundreds — even thousands! — blow up their accounts.

Most traders fail. This guide is for those who want to trade smart.

It’s for traders who want to understand penny stocks and work toward their goals the right way … over time and with discipline.

Boring, right? Trading isn’t always fun. Executing an order can be exciting … But trading is a lot of research, scanning, keeping watchlists, working hard, and waiting for the right setups.

I’ll be real. For me, trading penny stocks was about getting rich … at first. And I’ve made over $7.9 million trading these sketchy stocks.

Early on, I bought a bunch of fancy cars and fulfilled my childhood dream. I’m over that. Now I donate all my trading profits to charity. And these days, I get the most joy from teaching and my charity Karmagawa.

My point? Goals can change. Trading penny stocks could be part of you reaching them, whatever they are.

Penny Stocks: Know the Full Story

Again, these are NOT stable, established companies. They’re usually small. They might be new and in an up-and-coming sector or even be in danger of going out of business.

This part’s important: Unless these companies list on a bigger exchange, they’re not required to make the same SEC filings as their bigger counterparts.

So you can’t take things for granted with penny stocks as you might with bigger companies.

Again … penny stocks can be sketchy.

But it also means that I think you can learn to trade penny stocks faster than larger securities.

The low price point means you can start trading with a small account and learn as you go. Yes, your returns may be small … but so are your losses. It’s one way to scale up slowly, over time.

Is It Worth It to Learn to Trade Penny Stocks in 2025?

Listen, I’m biased. Penny stocks have made me millions.

Are they worth it? Can they help you grow your account? I think so. But these are possibilities, not promises. You need to know these things:

  • Penny stocks are NOT for every trader.
  • Traders need a solid work ethic.
  • You have to learn to think for yourself.
  • Always be willing to do research.
  • Discipline is mandatory.
  • You’ll learn a LOT over your entire career.
  • You must build trading plans and stick to them.

If you can’t do ALL of these things, then penny stocks probably aren’t worth it for you.

But if you’re willing to educate yourself and become a self-sufficient trader, then yes, I think it’s worth it.

Penny Stocks: Know the Risks of Trading Them

All trading is risky. That means penny stocks too.

  • They’re generally not as regulated as large-cap stocks.
  • Penny stocks are volatile.
  • Most of these companies fail.
  • Pump-and-dump schemes are rife.
  • There’s a lack of information and reporting.
  • Many of these stocks have poor liquidity.

Guess what? I don’t like risk. You don’t have to either…

How to Minimize Risk When Trading Penny Stocks

To me, you should hate risk so much that you’ll do everything possible to avoid it!

It’s simple: If you take huge risks in the stock market, you stand to lose a huge amount of money. In some cases, you could lose even more than you invested in the first place.

Not my idea of a smart trading strategy.

If you want to stay in the game for the long run, practice smart risk management.

For example, never risk more than 10% of your trading account on a single play. If you have a small trading account, maybe limit that to 1%.

Set boundaries based on your risk tolerance.

Then, write down your own rules and stick to them.

Need help figuring out the rules? Start here.

Want to Trade Penny Stocks? The Right Mindset Is Crucial

Tim Sykes top penny stocks list trading education September 13, 2021
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Trading penny stocks requires a specific mindset, especially when it comes to failure. If you always need to be right, this isn’t the game for you.

In trading, failure is unavoidable. I’ve failed over and over.

Don’t believe it? In my book, “An American Hedge Fund” I recount some of my biggest mistakes and losses in full detail.

Get your copy for no cost here.

Instead of trying to avoid failure, learn from it. If you’re willing to work hard, accept failure, and learn from your mistakes, pennystocking could be right up your alley.

How Can Investors Find Penny Stocks?

Finding the right penny stocks isn’t about guessing—it’s about spotting patterns. Traders should focus on penny stock market charts, penny stock market indicators, and small-cap market analysis to identify stocks with real movement. Some of the best trading opportunities come from penny stock market breakouts, where a stock’s momentum builds before a big move.

A good starting point is looking at stock moves, especially stocks that have a history of running. However, not every spike leads to a profitable trade—many stocks quickly turn into stock losers if you don’t time your exit right. I’ve spent years teaching traders how to separate hype from real small-cap momentum, using proven small-cap strategies instead of blindly following stock promotions.

What Is the Best Way to Make Money in Penny Stocks?

Profitable penny stock trading requires discipline, not luck. Penny stock scalping and penny stock day trading are fast-paced strategies that take advantage of intraday volatility, while penny stock market swing trading focuses on short-term trends over days or weeks. The key is recognizing when a stock has real small-cap market momentum versus when it’s just a pump-and-dump setup.

The best way to profit is to focus on penny stock market breakouts while managing penny stock risk. Too many traders hold onto small-cap investments hoping for a miracle recovery when they should be cutting small-cap losses quickly. I always remind traders: taking a small, controlled loss is part of the game—letting a bad trade spiral into a huge penny stock market loss is how you blow up an account.

There’s no one-size-fits-all answer here. Some traders go long, others go short. Some play the news, others focus on technical analysis. The best strategy? The one that works for you.

How to Trade Penny Stocks: Start With the Basics

New traders often think penny stock swing trading is about picking the “right” stock, but the truth is it’s about managing risk. Penny stock analysis starts with recognizing stock market patterns, understanding stock market factors, and using the right penny stock indicators. Stock market careers are built on consistency, not just one lucky trade.

Many traders overlook stock market strength and liquidity when trading penny stocks. A stock may look good on paper, but if it lacks stock market momentum, it’s easy to get trapped in a position. I’ve taught traders how to use stock market understanding to separate solid stock breakouts from fake pumps. The basics matter — if you can’t read stock market charts, you shouldn’t be trading penny stocks.

A good starting point? This guide and my student Jamil’s book “The Complete Penny Stock Course.” 

It covers all the basics and more. From there, if you want to take it to the next level, consider joining my Trading Challenge.

Stock Broker

Finding the right broker is a key step in trading penny stocks. Some brokers restrict small-cap market trading, while others charge excessive fees for stock market day trading. Stock market forex traders might not face these challenges, but penny stock traders must be selective.

Your broker is the gateway between you and trades. Choose a good one … Do your research and check out this guide for more tips.

Stock Screener

A stock screener can help you narrow down the many stocks available to trade. I use StocksToTrade, which can also help with the next item…

Charting Software

Before every trade, you need to perform a detailed stock analysis.

There are two key types of stock analysis: fundamental analysis and technical analysis.

StocksToTrade can help you do both: it has awesome charting software and links to stock news, SEC filings, and even social media mentions.

With day trading penny stocks, technical analysis — reading the charts — matters more. Chart patterns show me how a stock’s performed over weeks, months, or even years. That helps me build my…

Trading Plan

A trading plan is where you plot out entry and exit points, risk, and profit goals. Ideally, you base the plan on careful research and stick to it.

Different strategies require different trading plan approaches. Penny stock market scalping requires a fast exit strategy, while penny stock swing trading focuses on longer-term momentum. The worst thing a trader can do is hold a losing stock without a defined risk level. Penny stock losses add up quickly without a disciplined approach.

Must-Know Stock Terms

Trading is harder if you don’t understand basic trading terms. Here are a few key ones:

  • Buy: To buy shares of a stock
  • Sell: To sell shares of a stock
  • Short sell: To sell borrowed shares
  • Buy to cover: To buy back shares you’ve sold after borrowing
  • Bid: The highest price someone will pay to buy
  • Ask: The lowest price someone will accept to sell
  • Spread: The difference between the bid and ask prices
  • Uptick: The following trade results in a higher price
  • Downtick: The following trade results in a lower price

Want more? Every trader should know these terms.

Where Can Traders Buy and Sell Penny Stocks?

You can find some penny stocks on major exchanges, but certain stocks don’t meet the requirements of the bigger exchanges due to size, profits, and so on.

Companies like these trade on the OTC markets. OTC stocks tend to be lower in price but higher in risk. They’re generally up-and-coming companies, and OTC listing requirements aren’t as strict as the NYSE or Nasdaq.

To trade these stocks, you’ll need a certain broker …

What Are the Best Brokers for Trading Penny Stocks in 2025?

The best broker is the one that sucks the least for your needs. Traders need access to small-cap scalping, penny stock market momentum plays, and OTC stocks — many brokers don’t offer that. E-Trade and Interactive Brokers are popular, but neither is perfect.

Robinhood isn’t the best choice for penny stock traders. While they have no minimum deposit requirements, they don’t offer access to many OTC stocks, which is where some of the best stock market breakout setups occur. Traders need a broker that executes orders efficiently and provides access to penny stock market patterns, not just the biggest names in the stock market.

How to Find Top Penny Stocks to Trade

Finding the right penny stock is about more than just looking at stock prices. Traders should use stock market charts, stock market indicators, and penny stock analysis to identify stocks with real stock market momentum. A stock may show strong stock symbolism in the news, but that doesn’t mean it’s a good trade.

Stock market strength is key. If a penny stock lacks stock liquidity, traders may struggle to exit at the desired price. I focus on penny stocks with strong stock market moves, high volume, and a clear stock market breakout pattern. Every trade should be based on stock market understanding, not hype.

Here’s how to get started.

Use a Penny Stock Scanner Every Day to Find Opportunities

Remember how I mentioned StocksToTrade earlier? I helped design this platform to fit a day trader’s everyday needs.

A scanner like STT can help you narrow down the best stocks for your strategy. You filter thousands of stocks based on criteria that you set.

And powerful scanners should come with powerful tools. Just check out STT’s Breaking News Chat feature. I’ve found so many trades thanks to the Breaking News Chat team.

The scanner you use is your choice. Just make sure it has everything you need to help you daily.

Develop Your Unique Trading Strategy for Penny Stocks

You must learn to think for yourself. Too many traders start off thinking they can follow other traders or alerts. But it’s impossible. Penny stocks move fast.

And every trader has a unique style … and certain strengths and weaknesses. So work on increasing your knowledge and developing your trading style.

A lot of factors play into trading success — or lack thereof. Know this: None of the top traders from my Challenge follow other traders’ alerts. They develop their strategies. All I do is provide the training wheels.

My Top Tips for Trading Penny Stocks

Want some real insider tips about how to get ahead as a penny stock trader? Here goes…

  • Educate yourself. This is key. Get smart and trade smarter.
  • Be adaptable. Patterns repeat, but it’s not an exact science. Markets change. So unless you want to become extinct as a trader, be nimble and adaptable.
  • Maintain a strong penny stocks watchlist
  • Keep a trading journal
  • Learn from your mistakes. Have you ever lost $15,000 on a single play? I have (starting stake $210,000). My mistakes are numerous, but I’m still successful. That’s because I learn from my mistakes and cut losses quickly!

Start Learning How to Trade Penny Stocks — Apply for My Trading Challenge

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My Trading Challenge is based on my 20+ years of experience as a trader. The goal? Help traders help themselves … I want you to trade smart, stay safe, and be self-sufficient.

During my time in the market, I’ve learned a lot — and I share it all with my students.

I don’t accept everyone. I might be the hardest-working trading teacher out there, and I want people to appreciate my lessons.

It’s up to you to do the heavy lifting. I want you to use my teachings to develop your strategy.

The Challenge has everything you need:

Ask yourself this: What’s the best that could happen if you dedicate yourself to learning how to trade penny stocks?

Learn the Key Indicators for Trading Penny Stocks

I call myself a glorified history teacher because I constantly look to the past. It’s how I try to figure out how stocks might move in the future.

You have to consider key indicators to determine how a stock might perform in the future.

And you need to learn to read chart patterns and understand them. It takes time and practice.

Here’s a bit more on indicators and charts…

Check for These Positive Indicators Before You Trade

These signs that indicate a stock could continue to go up:

  • Positive earnings and new contracts
  • Positive financing
  • New partnerships
  • Increased trading volume
  • Positive industry news

Negative Stock Indicators

These signs could indicate you should stay away … or consider going short.

  • Financing secured through desperation
  • Rumors of negativity from within the company
  • Poor industry news
  • Reduced trading volume

The Key to Trading Penny Stocks: Chart Patterns

I mentioned the importance of charts before. And I know it seems hard at first. Just start practicing and you can learn to read chart patterns.

Also, look at several time frames for an overall view of a stock’s momentum and past performance.

Chart Types

Here are the four most common types of charts:

  • Bar
  • Candlestick
  • Line
  • Area

I favor the candlestick — learn why here.

Bar and line charts are simple but don’t tell you much. I find it laughable that people try to rely on oversimplified charts to make trading decisions … but that’s just me. And I don’t know anyone who prefers area charts.

Stock Chart Patterns

high frequency trading
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Chart patterns describe how a stock price moves over time. Patterns help you make educated guesses about a stock’s future performance. Again, it’s not an exact science.

Clean Stock Chart

This is my favorite type of chart. The stock’s price moves in one direction — up or down — with regular but brief changes in direction that quickly reverse.

Pay attention to clean charts. They’re highly predictive, which is great for traders like me.

But you don’t want a chart that looks too clean, like an upward or downward trend with almost no variation.

An extremely clean chart often precipitates a steep increase followed by a steep decrease in price. If you’re not fast enough, you could lose significant cash.

Clean Bullish

Know the terms bull and bear market?

A bull market trends upward, while a bear market trends down. The same applies to chart patterns.

A clean bullish chart shows a steady upward trend. The stock price might fall on occasion, but it jumps right back up — often higher than before its brief decline.

Clean Bearish

A clean bearish chart is the opposite of a clean bullish chart. There’s a definitive decline in stock price over time. It might spike every occasionally, but the downhill pattern is evident at a glance.

It often happens after a steep price increase. A company might announce news that excites investors. The stock price shoots up but can’t sustain, so it begins to fall back.

Clean Breakout and Clean Breakdown

Clean breakouts and clean breakdowns show that a stock has either broken through resistance or fallen below support.

The chart is clean because the pattern either repeats or shows significant pattern repeats before the breakout or breakdown.

Clean Cup and Handle

This is a shape you can spot on certain charts. A downward trend is followed by an upward trend — it looks like a cup. In a clean cup and handle, the downward and upward trends are smooth.

After the cup there’s a pullback — that’s the handle. If the cup and handle plays out like the classic pattern, it then continues upward. After the pullback, there’s a breakout over the level formed by the cup. It’s difficult to play this type of chart but not impossible.

Messy Stock

I encourage you to look at messy stocks. There’s no discernible pattern. It’s all over the place and its peaks and valleys don’t repeat reliably.

So learn from these charts, but don’t trade on them. There’s no way to predict what the stock will do because you don’t have a pattern to follow.

Messy Breakdown

A messy breakdown starts with an upward trend. At first, the chart looks pretty clean (and appealing). Then, seemingly out of nowhere, it’ll drop.

The pattern becomes messy from there.

My Top Chart Patterns for Trading Penny Stocks

Now, onto the good stuff! Nobody — except my Trading Challenge students — use these patterns, because they’re mine.

I created them after watching stock charts and trading for years.

The Supernova Penny Stock Chart Pattern

Supernova penny stock chart pattern
DGLY supernova chart: 3-month, 1-day candle — courtesy of StocksToTrade.com

We’ll start with my favorite. The supernova looks like a stock chart exploded. It might have modest peaks and valleys over several months, then skyrocket for a short period.

I love supernovas. If you learn to ride the momentum, the potential gains can be meaty. I’ve seen penny stocks shoot up to 10 times or more in price. Learn more about this pattern in my Supernova webinar replay.

The Stair Stepper

stair stepper penny stock pattern
MPNGF stair stepper chart: 6-week, 1-hour candle — courtesy of StocksToTrade.com

This stock pattern looks just like a staircase viewed from the side. It goes up, flatlines, then goes up again. There might be a few dips along the way, but the stair-stepper pattern repeats.

The Snore

the snore penny stock pattern
HUYA chart: 1-year, 1-day candle, the snore — courtesy of StocksToTrade.com

Ignore this stock pattern at all costs. It’s incredibly boring and lacks liquidity and volatility.

The Crow

the crow penny stock pattern
BTU chart: 1-year, 1-day candle, The crow — courtesy of StocksToTrade.com

I named this pattern the crow because it’s like watching a bird pick off your cash one chunk at a time until there’s nothing left. If you start to see a crow pattern, get out immediately.

Here are 13 penny stock chart patterns to study now.

How to Use Financial Ratios for Trading Penny Stocks

Financial ratios can help traders gauge whether a penny stock has real potential or is just another hype play. While traditional investors look at small-cap analysis tools like price-to-earnings (P/E) or debt-to-equity ratios, penny stock traders focus more on volume, liquidity, and momentum-based indicators. A stock might look great on paper, but if it doesn’t have the right small-cap market patterns or small-cap market breakout potential, it’s just another low-priced stock with no real trade opportunity.

I’ve seen traders get too caught up in the numbers instead of focusing on what actually moves stocks. Penny stock market day trading is about timing and reaction speed, not just financial metrics. Using small-cap market indicators like relative volume and float rotation gives you a better edge in spotting high-probability setups that fit into a strong penny stock market profit strategy.

How to Avoid Broker Fees on Penny Stocks

Broker fees can eat into penny stock profits, especially when trading small-cap day trading setups with multiple entries and exits. Some brokers charge per trade, while others impose fees for small-cap market scalping or small-cap swing trading, making it critical to understand how these costs impact overall performance. Choosing a broker with transparent pricing and no hidden stock market rates can make a huge difference for active traders.

While some platforms advertise commission-free trading, they often lack access to OTC stocks or charge hidden spreads that make trading more expensive in the long run. I always tell traders to weigh the costs against the services offered—sometimes, paying a little more for reliable executions is worth avoiding small-cap market loss due to poor fills. The best approach is to compare stock market money market accounts, stock market CDs, and different platforms to ensure you’re not overpaying for the ability to trade the setups you need.

Bottom Line: Start Your Penny Stock Journey and Gear Up for 2025 Trades

© Millionaire Media, LLC

You made it this far — congratulations!

That tells me you’re not one of the fools looking to get into penny stocks to get rich quick… Or at least you understand that there’s more to trading than just buying, selling, and becoming a millionaire in a month.

Penny stocks aren’t for everyone. They’re volatile, the companies can be sketchy, and they present a significant level of risk for you as a trader.

If you’re willing to take the time to educate yourself and scale up slowly, you’ll be taking the right steps to build a strong foundation and work toward trading smarter.

Leave a comment and tell me if you’re ready to commit to your future. How willing are you to put in the work and become a smart penny stock trader?

Frequently Asked Questions

How Much Money Do You Need to Start Day Trading Penny Stocks?

Starting day trading penny stocks doesn’t require a large capital investment, thanks to their low prices. You can start with a relatively small amount of money, often even a few hundred dollars, provided you are aware of the risks and manage your funds wisely. It’s crucial to use only money that you can afford to lose, given the high-risk nature of penny stock trading.

Which Penny Stocks Give the Highest Return?

While specific stock performance can vary widely, penny stocks in rapidly growing industries or those experiencing significant positive news flow can offer substantial returns. However, it is essential to conduct thorough research and perform a rigorous analysis using real-time data and trading analytics to identify these opportunities.

Is It Risky to Invest in Penny Stocks?

Yes, investing in penny stocks is considered high-risk due to their volatility, limited liquidity, and often less transparency from the companies issuing them. While the potential for high returns exists, the risk of significant losses is equally probable. Trading, rather than investing, in penny stocks allows you to leverage their volatility for quick gains, without long-term exposure to their inherent risks.

What Is the Best Investment Strategy for Penny Stock Investors?

Starting with penny stocks, investors often expand to diverse vehicles like ETFs and crypto, including Bitcoin, to balance risk. It’s crucial to understand the volatility and market specifics of each type, such as derivatives and equities, which can offer broader exposure compared to penny stocks alone.

How Do Financial Institutions Influence Penny Stock Trading?

Financial institutions like banks offer products such as CD and money market accounts that can be prudent places to keep funds while not invested in the market. Investors should compare savings accounts and loan options to ensure they have optimal liquidity and financial support for trading activities.

What Are the Key Rate Considerations for Penny Stock Traders?

Understanding different rates such as CD rates, mortgage rates, and auto loan rates is vital for personal finance management. These rates can affect an investor’s overall financial strategy and ability to invest in the volatile penny stock market.

How Important Is Financial Planning in Penny Stock Investing?

Financial planning, including retirement planning, is crucial when engaging in penny stock investing. Working with a financial advisor can help map out long-term financial goals while navigating the immediate risks associated with penny stocks.

Why Is Compliance Crucial in Penny Stock Trading?

Compliance with financial regulations, including understanding privacy choices and adhering to proper disclosure norms, protects both the advisor and client. Reviews and advertiser disclosures can provide transparency and build trust among users and clients in the penny stock trading community.

How Does Online Accessibility Enhance Penny Stock Trading?

Online courses and accessible web pages provide crucial information and learning opportunities for penny stock traders. Ensuring easy access and touch points online allows users to stay informed and react quickly to market changes.

How Do Other Financial Entities Affect Penny Stock Investments?

Diversifying into real estate or managing personal finance through tools like life insurance and credit cards can provide financial stability. This stability is crucial when engaging in the high-risk environment of penny stock trading, where market fluctuations are significant.

How Can Loans and Business Advisors Enhance Your Trading Strategy?

Securing loans can provide the capital necessary to start trading penny stocks, while experienced business advisors can offer valuable quotes and insights to refine your investment strategy. By leveraging both financial support and expert advice, traders can make informed decisions that enhance their trading outcomes.

What Is the Difference Between Small-Cap Market Swing Trading and Small-Cap Market Day Trading?

Small-cap market swing trading involves holding stocks for several days or weeks, aiming to capitalize on larger price movements. Small-cap market day trading, on the other hand, focuses on short-term moves within a single trading session, requiring faster execution and risk management. Both strategies carry small-cap market risk, but day trading demands quicker decision-making and strict discipline to lock in small-cap market profit.

How Can Small-Cap Market Charts Help Traders Make Better Decisions?

Small-cap market charts provide visual insights into price action, trends, and key support or resistance levels. By studying small-cap patterns, traders can identify setups with high probability for profitable trades. Using these charts effectively can help traders manage small-cap risk and increase their chances of securing small-cap profit.

What Are the Biggest Stock Market Questions Traders Should Ask Before Trading Small-Cap Stocks?

Traders should ask whether a stock has strong volume, a clear catalyst, and a predictable trading pattern. Understanding small-cap market risk is crucial, as these stocks can be highly volatile and move quickly in either direction. The best traders analyze small-cap patterns and use historical data to anticipate stock movements before committing to a trade.

How Do Traders Maximize Small-Cap Profit While Minimizing Risk?

Maximizing small-cap profit comes down to proper risk management, choosing the right stocks, and executing trades with precision. Traders use small-cap market swing trading strategies to catch longer uptrends and small-cap market day trading for quick scalps on momentum plays. Controlling position sizes and setting stop-losses are key to reducing small-cap risk and avoiding unnecessary losses.

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Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity.
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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”

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