Trading Penny Stocks and How to Use Risk Management for Safety

Trading Penny Stocks and How to Use Risk Management for Safety



hey friends Lucien here with the bullish Bears team wanted to make this video on the different types of penny stock trading strategies this is going to be kind of a highlighted overview video the different types of strategies when penny you know doing penny stocks this video is also going to be part of a course that we offer on our website at bullish bearish calm so depending when you watch this video just keep an eye out under our courses section and you'll see this added into a penny stocks course and also on our website we have several off other courses that we offer to our community members so if you want to learn about you know day trading candlesticks options all that good stuff head over to our website the link again will be below and take our free courses all right so let's get into it and let's talk about the different types of penny stock strategies and things to look for when trading penny stocks first thing that you want to look at is the flow of a stock flow is basically the total number of shares that's able to be traded of a particular stock and there's low float stocks medium flow and high float stocks so kind of the you know the overall consensus or pretty much the lower float of a stock the higher the volatility so the quicker that's going to pump up in the quicker that it's going to drop back down so the term pump-and-dump many times comes from low float stocks again very risky however very lucrative so when you hear about penny stocks you'll hear about stocks that you know Brittany traders are trading that gap up they pump up really quick dumped back down they're trading momentum so typically it falls into the low float sector you know the penny stuff they also the term penny stocks a little bit relative some people will call penny stocks anything under a dollar you know it's also kind of basically up to the $3.00 range I think technical if you want to be technical anything up to the $3.00 range so anywhere you know from less than a dollar that's typically or a lot of people think of just penny stocks that way but it's also you know goes up to three dollars and you know other people will call them small cap stocks so it's kind of a range right so one penny stock when I'm talking penny stock strategies I'm kind of talking about low floater small cap stocks as well as you know kind of anything up to that ten dollar range so kind of in that small cap range you know when I'm talking about these penny stock strategies so low flow typically would be anything or really low flow it would be anything under ten million shares right so you can see over here I kind of have a little you know icon that I add or a little tab here under thinkorswim if you go to the customize tab right over here you can add shares right up over in here so this is a really good gauge this is technically shares outstanding not float but you know TD kind of shoots a little bit higher or the shares outstanding is higher than float so typically if you see anything like say around 16 million this might be nearer to 10 million in flow right if you see 22 million maybe it's 1516 million or so so this is a good gauge to look at so you know anything under 10 million very low flow very volatile just think about you know not many shares able to be traded so when somebody buys or sells it creates lots of volatility and hence things that you see like this like a pump up and then a dump back down right so a medium float stock might be anywhere again it's kind of relative right so low really low float would be under 10 million low float still under – like basically under 20 million so if you see something like 22 million you know these two are here would be very low float stocks when you get like over 50 million to a hundred million or so then you're kind of like more medium type of flow so they kind of like the pump and dump a little less they still will many a times but the volatility or the the movement will be maybe a little bit more drastic higher flow over a hundred million those are typically slower so they gap up when they gap up and drop back down typically there are a little bit lower of a move so again you can trade you know didi trade hicap or I'm sorry D trade you know with the penny stocks you can do really low float medium float high float stocks again falls under the umbrella of small cap stocks you know some people love the volatility and the quickness of the low floaters that you know pump up and dump really quick other people are like hey I'd like more medium to higher float small cap stocks well that's a whole other area that you can trade as well so that's kind of a strategy within you know penny stocks that you can trade low flow medium flow and higher float stocks this is kind of again you know check with your broker TD doesn't have an exact float tab but you know this is perfect it works it works just fine having it over here you can go to a website like you know Yahoo Finance or another one just kind of just look up the float of the stock or again each day we do post in the morning trade ideas gap errs trade ideas is our favorite scanner that we like to use you know to trade momentum stocks or these penny stocks so each morning we post the gap errs right here by 9:15 a.m. and you can see they have a float tab right on there that shows you so you can see these yellow ones right here a million two million very low flow kind of like these 27 34 or 43 million these are a little bit more medium flow and then the higher you go and these white ones over here these are just the color-coded that we put on there you'll see these are more higher float stocks so trade ideas we share the scanner each day we post the Gabor's here this is another great gauge for you to get the flow of a stock so it's basically important number one determine what your kind of trading style is if you like the low floaters focus on ones that are under 20 million if you want more time to trade so basically with a low floater you're gonna be typically in those you know on average those low floaters maybe a minute you know a lot of times you're in and out in 10-15 seconds maybe even less medium floaters might catch you in you know a minute or a couple minutes at a time higher floaters they tend to grind sometimes a little bit more so you might be able to be in those for a few minutes again kind of a range you get to determine your trading style with these penny stocks so if you want to be in and out within seconds focus on low floaters if you want a little bit more time then give yourself you know you don't look at more of the medium and the higher floats we also do on our website under penny stocks lists we do post a day trading watchlist here each day and so if you click right up over in here you'll see I'm making one I'm making this video on a Friday for Monday you'll see the markets a little bit wonky lately so it's a little bit of a challenge finding them but you can still see our penny stocks watch list for Monday we have a you know a few on here there's a couple lower float one medium flow and a higher float right up in here and we do post our alerts setups right here we are not a pumping service so we do not pump penny stocks to our members we show you the alert levels ahead of time so you can come in here and read the different alert levels and input them into your brokerage account and decide whether you're going to trade them yourself right so we're not telling you enter enter and exit on penny stocks but we're gonna give you a guide to look at so you can come in here and take a look at our alert setups and decide if you're going to trade them alright we do offer real-time stock alert service here but this is for more larger caps or options so I just want to show you this while we're on our website we do post our day trade watch let's here so each night by 9:00 p.m. you can take our basic hour penny stocks which are basically small caps right because little range all the way up to kind of sometimes some of them are up to $10 or even a little bit more and they give you a little bit of a range whether you want to trade some of the you know the real low floaters the penny stocks all the way up to you know $20 stocks at times depending and you know you know kind of more the medium to higher range so if you want a day trade I'm up in here you get a range in here and then each morning we give you the trade ideas low floaters right here so you can take a combination of our trade ideas low flow you know stocks that hit the scanner each morning in our watchlist and get set up each day trade right so then if you look at stocks like that are hitting trade ideas and he's kind of the low floaters right let's take a look at a.m. P let's see what float this one is right now a.m. PE actually this is kind of a higher float stock it actually looks say this is one that looks like it's a low float stock and how it moved right so this is typically this is actually one right here a.m. PE this is kind of a higher float stock and it moved like a low floater so that's why saying you can't always go completely 100% right you know you know these stocks will gap up and they will drop hard as well but it's also a penny stock so you'll see typically like a stock like this this is something we would look at let's pretend this is a low floater for a minute and if we were looking at trade ideas in the morning you know we can go and map it out and see okay here's pre market high right over here 69 cents now this is a stock you know if you go to the daily chart over here this is the stock that had actually a breakout you can see there's a gap up in here gap errs is another very very you know filling of the gap when you see a gap on a chart be aware that a stock is going to want to or may want to write there's no guarantee when you see a big wide gap right here on a chart these stocks that gap up many times they'll jump into the gap and they'll eventually want to fill it now there's a saying that says all gaps must be filled but it's also basically when right so you can see this one kind of moved into the gap today and then smacked right back down so lots of volatility this is actually an fu pattern basically what I'm saying is what it is right you put a middle finger here this is those pump-and-dump stocks many times create that fu pattern which is a pattern that pumps up dumps backs down thumps dumps back down and catches a lot of new traders up at the top of resistance level so be very well aware of gaps on charts because these penny stocks have a habit of wanting to go up and fill a gap doesn't mean it won't continue up this might take money you'll see right here this has been trading sideways for a while near a gap eventually it may want to go fill it may take a while sometimes they go a lot quicker than others but you'll see here's a again an example of a higher flow stock that gapped up gave an fu pattern dump back down this was another strategy to be aware of as well not only was there a gap on the daily this was a stock that gaps from 70 cents over a dollar so many of these stocks that go from a penny stock and they go and break have a dollar break that's another strategy to be aware of that they pump up sometimes they you know get a day or two move out of them where it's that dollar right so that dollar is a really huge important psychological resistance point those whole and half dollar amounts especially a break of a dollar so you can see this thing gave it a lot of momentum it went broke a dollar and I couldn't hold and it came down and fell so again be aware of gaps on dailies for all stocks right not just penny stocks but on penny stocks be aware of those stocks that might be looking to break out above a dollar watch for a pump and see if it can hold the dollar range but many times when they go to break a dollar they don't hold very well and then they just fall back down so again another popular strategy for those that like to just trade just really you know stocks under a dollar ones that are broaching that dollar you know that's a way to be able to you know treat a break of a dollar and you know scalp right and you get you can see typically this is running like a low floater but this is like a high flow penny stock that's running like a low floater so that's kind of an unusual not unusual but it's you know just very interesting to look at where you could see that maybe that you would think it wouldn't dump as quickly but it still does so again with trading what you want to learn anything can happen you know there's the there's the norm but it's not always the technically the rule right there's always exception to the rule so you can see right here if we went over to our GAAP errs each morning right over here with trade ideas we would basically go in here and scan for what's gapping up in the morning look at what's showing volume and then basically map out pre market highs and then watch at the open and see if price will make out above it and hold if what I'm saying to you is really overwhelming if you're new number one again take our courses you'll see we have a courses section up here we will be adding that this penny stocks course when I'm done with it somewhere up underneath the courses section but if you need more training again especially trading penny stocks we have our day trade room that we do right over in here we live stream every day so you'll see what I'm talking about right now you know after the markets closed you'll see us doing all of this process in the morning so you'll see us taking our watchlist up right here mapping out support and resistance in the pre market you'll see us taking the top gainers under trade ideas up here ones that have volume mapping out support and resistance and then creating you know a watch list having it on the sidebar and seeing where the patterns are holding and where there's potential breakouts and then you know again if there's a good set up then we take it so we're doing all of this stuff live pre market so you could always try us out we have a 14 day trial if you want to try out our community alright so that was one again a dollar break watch the volatility watch for gaps on all small e'en large cap stocks again there's that rule or the saying it says all gaps must be filled but again it's a matter of when they do it could take long you know a long time there's no guarantee eventually will because sometimes penny stocks just fall forever and doesn't mean they're always gonna go back up so igc is one right up here you'll see this was one that had a decent amount of volume in the pre market here today they said about three hundred thousand volume right so what we would have done was during the pre market we would have mapped out pre market highs which is that dollar thirty five level you'll see it won all the way up pre market smacked back down and it kind of had this V bottom pattern that was forming right in here right here here's a V bottom pattern and this is where you got to be very very careful right so when a stock breaks pre market highs you know you want to make sure that it holds before taking a trade you know some people will trade the momentum but in and get out within seconds but you have to be super quick with your hotkeys again hotkeys another very important strategy to get in and out of a tray without kind of manually going through an order having hotkeys set up so you can get in and out of your trade within seconds because when you're trading momentum like these especially with these low floaters you got to be very careful and you'll see right here this is pre market high line right here this thing went up from you know 135 big-deal up to 140 so this is a fake-out went up smacked right back down so a lot of new traders that are coming in they'll say oh I'm gonna get in at the break of a pre market high but they don't watch for confirmation of it to hold and this is where they get faked out so if you put in your hotkey right here and it went up and it's smack back down and went from 140 all the way back down to 116 this would have shook out a lot of people now again any of times these stocks this is where you have to be careful at opening bell don't just trade the first candle you want to get the right setup this happens a lot fake outs comes back down a you bottom pattern will create you know kind of form here and then you know some new traders will get caught on the fake out above the break of the pre market high price comes back down forms a u pattern and then more experienced traders then they decide ok are they gonna get in an anticipation of a break of high of day or are they gonna watch for it to go breakout come back down and retest and now you have your kind of your cup and handle ish pattern here and then get it in at the break of you know with the pattern comma formation holding on this cup and handle for the breakout and then scalp this move up here scalping another very popular strategy again you want to be careful as with trading you don't want to be greedy right a lot of new traders will come in they want to be greedy like oh this stock just this penny stock when I moved a dollar today I could have made a dollar well not so fast right within you know move that may have moved a dollar you might have only entry like good solid entries of maybe your scalp and 10 or 15 cents right we all want to hit homeruns but it's not realistic sometimes you can ride a good move for a while you know a stock will breakout and you could ride that 9 which is another strategy I'll show again riding the nine it breaks out and you can ride the nine moving average line until you get a candlestick close below it and make money that way again another type of trading strategy but again there's so many strategies within that's B strategies but you want to be careful when a stock breaks pre market high you want to see it hold so that would be a retest if a stock breaks out you can get in potentially at the put the anticipation of a breakout right there are traders that will trade this and scalp this one this candle real quick boom and get in and out there's others that want to watch and wait for the retest so let the move happen come back over here forms the pattern you can see it's 942 it took almost 15 minutes now you have a cup and a handle they would get in right here so broke out came back down the retest comes right here there's confirmation then they would trade this and you can see there's a couple minutes right there they're scalping 10 cents right there so scalping again you know what are you looking to do you're looking to use your account as leverage when trading these small cap stocks right so you can trade cheaper shares of a stock and scalp 1015 cents but you know don't be looking hey I'm buying a thousand shares I want this thing to move a dollar so I made a thousand bucks well sometimes you'll get lucky like that but that's that's the exception not the norm right to build that account that's where it's hey if you're new and you're buying a thousand shares you know you're scalping you know this 137 or 140 move up to 149 your scalp and ten cents you bought a thousand shares you made a hundred bucks you bought 5,000 shares you made five hundred dollars right that's how you build your account now I want to show you a ride the nine strategy the market especially even today it was a little bit off so it's kind of tough to find some good examples of it but just it's actually kind of good to show you when it's not so clear-cut because again the market has up days and down days and it doesn't always go the way you want it to so there's really great days where you can you know ride the nine but other times it just could also be a little bit of a grind so you can see a stock let's say like HCR so this really didn't have anything much going on at the moment but like let's say you saw to give you an example of this one I'm just want to show you here let's go back over in here so just as an example right so here's a few minutes into the market you can see okay this one you can see kind of a high a day right here at 280 but you can see it formed this kind of this triangular pattern right here you can see a smaller green candle near the nine EMA some people might want to say okay I want to get in at the anticipation of a break here so before it breaks high of day near a moving average line and then when it you know breaks out they could use a candlestick close below this blue line the nine EMA as a stop so that could be a ride the nine while taking profits along the way right obviously be aware of let's say three dollars here that's gonna be psychological resistance level so that's a whole dollar amount so someone might come down here and say okay I'm gonna get in near this blue line this nine EMA watch for a breakout decide if they're gonna take profits everybody's you know depending you know everybody's profit strategies are different right so they can if they're looking at this one nine or this one-minute chart right here they get in and a break here they know $3.00 is going to be resistance levels they look at candlesticks to decide whether they're going to take profits along the way or if you again you can say hey I will get in here and then my other rule might be when I get a candlestick close below the 90 ma that will be my my absolute way to get out so in here this one up comes down now this one really dropped back down right so here's your first candlestick close below the 90 MA you could have taken your profits there if you didn't take them along the way here and you ignore the candlesticks you know again big deal it's a 283 from 278 you only got five cents right but if you got in back here at 278 you could have scalped you know potentially 10 cents throughout this process here now this is looking at the one-minute chart right now if you're looking at the 5-minute you could have said okay I'd get my tree on the one minute and I'll get out on the five minute right so when you look on a five minute chart you can see okay where's my warning you have these three candles up and then you can see this spinning top red candle price is really far away from the moving average lines this is where I would potentially get out so if I was long down over here and I was looking at my five minute and what I'm gonna get out this is a huge warning sign this is gonna reverse this is a star pattern right up here the spinning top this combination is a star pattern this is warning you this is where shorting starts to come in when a stock gets overextended it wants to naturally come back down to the moving average lines the Bears are gonna come in and want to push it down so the bulls are pushing it up shorts are coming in and trying to push it back down so as you can see I'm showing you different chart type frames chart timeframes different types of strategies there's some people that have a strategy of only shorting these reversals back down this is a 5 minute you can do the same strategy on a one-minute chart if you want it to be quicker it's a little bit slower you slow it down more on a 5 minute chart if you see you can see these types of you know these it's a little bit different here but like you can see these these patterns you know these some people will trade them really quick from like in a 1 minute right back to the moving average line right here right so some people trade the one-minute breakouts out other shorts will come in and try to short it right back down real quick and trade it on a 1-minute strategy so you can short reversals you can do breakouts of you know on the 1 minute so you can do it on the 1 minutes an out of 5 right you just slow it down on a 5-minute strategy but ideally if you're trading stocks on a breakout really with anything you want a really good daily setup so a potential daily breakout or a gap fill and then you want a good 5 minutes set up and then look at your entries on a 1 minute and then you decide on your risk management whether you're gonna get out and take profits on a 1 or a 5-minute chart that's all based upon your preference another way you can look at a ride than 9 you can see a five minute chart setup here these candles are a little bit wonky but you can see kind of an ascending triangle flat top or a flag here you had a breakout right here of a dollar thirty right it broke out and now if you use that a candlestick close below the 90 MA and a five-minute chart again you can just change the different chart setups your first candlestick clothes would have been up here at a dollar 40 so again a dollar 32 a dollar 40 big deal again it looks a lot bigger than this but it's still 10 cents you could use this nine EMA this blue line as a guide so you can kind of do this on really any timeframe you could ride the nine on a one-minute a five-minute a daily chart and hourly all depends on your setup right and then look at you know reversal candles you can see this one right here was this is a warning candle didn't happen right away here was your warning again very overextended from the moving average lines bears try to push it down here's your battle here and then it kind of boom right back down just being aware price very far from moving average lines bears are gonna come in and try to short it back down alright so let's take a look at another couple more here I'll show you just trying to again give you a highlight of the different type of strategies to take a look at let's see in here you know another one if you had a breakout here kind of a cup pattern here flat top broke out right so it broke out dollar 95 gets overextended up here this is warning you take your profits but if you did and and you just waited for your first candle bit closed below even one you were late right down here to 11 after to night 195 you get back a lot of profit but a and 195 even getting out here at 211 you still that's still a decent profit right so you give up back a lot if you were too greedy and you waited for the candle close below the nine you've got to take in their profit still and still would have been a profitable trade so again you were looking for a great or good daily breakout you're looking for potential gap fills for a stock that wants to move up low floaters are going to be lot more volatile so you'll see this is OT LK it's on the low float side basically under 20 million and you'll see it goes up really comes back down these candlesticks you know to 24 down to two you know oh wait not huge but you can see they're all over the place low floaters you see a lot of this right they get really real crazy it's the battle in between on these five-minute candlesticks of the Bulls and the Bears duking it out Bulls trying to push it up Bears trying to push it right back that so let's review some of you know what we've talked about so far it's the float of a stock determines the movement low floaters a lot more volatile we do have our daily watch lists we post our trade ideas gap errs so you can determine whether you want to do lower flow medium float or higher float stocks watch for a break above pre market high you want to see it hold if the retest holds that's much better it's safer that's a retest conformation a lot safer to trade that way if you trade in anticipation of a break of a high make sure you have hot keys and you got to get out really quickly you know so that's a very riskier strategy a lot quicker of a move you can make money that way just make sure you know how to use your hotkeys again we have our day trading course we teach you and that as well how to use hotkeys and how to get them set up again that ride the 9th at 9 a.m. a strategy really on kind of any time a time frame that's a really good guide that you could use nothing is foolproof again it's a really nice guide if you get a good entry you could use a candlestick close below there as your way as you're a hard stop to get out again be aware of candlesticks very important trading candlesticks and patterns and reversals very important early warning signs of again potential entries and exits scalping again don't get greedy day trading whether it's a you know low flow penny stock or even kind of a higher mid you know small cap stock take profits along the way don't always try to hit the home run again shorting reversals the another one is red to green moves show you that right now red to green move is when a stock is red on the day and then it goes green you'll see this orange line I have on my chart it's the previous clothesline so when a stock goes from red up to green this is a very important support and resistance level so and you can see lots of volatility here boom it holds so you like to see when it goes red to green and hold its holding support it was resistance keep an eye on it that's a red to green move this is showing you at open this will also happen many of times you know during the morning or like throughout the day that previous you know previous clothesline very popular support and resistance level to be aware of so you can see a stock like this cen X had a V bottom it goes and it breaks out right it shows the Ray test retest retest and bounine it fails so many times you'll have a stock have false breakouts again everything is all about support and resistance and then knowing these candlesticks in these patterns in between we teach you all this stuff in our courses in our community again we have a couple candlesticks courses an e-book and all of that good stuff and then you have things like I'll show you another one here like reversals again I can go on and on and on but you have to kind of know this all together you know a stock it's really selling off like this many times a stock will have false breakouts you know you can see you know a candlestick setup like this a piercing pattern you know selling off green candlestick right here it's oversold again when a stocks overbought it wants to naturally come back down to the moving average lines you know with traders trying to push it down the shorts when a stock is oversold Bulls want to come back and try to push it back up to the moving average line so you look at these combo patterns like a piercing pattern right here when it's oversold you're gonna see the Bulls are gonna want to try to push it back to moving average on so that's a potential reversal pattern patterns will fail obviously you know you're trading real-world traders are moving the stock back and forth so again this is a potential reversal where you know stocks selling off this is another way to trade back to the moving average line so whereas the shorts before I was trying to where I was showing you they're trying to short it back down another way is if you don't want a short right you could always wait for a stock to get buried and reversal back to the moving average lines another way to trade when everybody's looking you know at ones that are gapping up you could also look at ones that are selling off for reversals back to the moving average lines so again there are a lot of different penny stock trading strategies these are just kind of a highlight of some of the most popular it's a lot so if you're new and you're just coming across this you might be like what the heck did he just say well again lots of information I keep an eye on our website at bullish bears calm you'll see a penny stocks course over there keep an eye on our YouTube channel as well and again you know follow us on social media we post lots of great content if you like this video we appreciate it if you like it share it comment on it and our our community we do lots of live streaming teaching coaching mentoring all of that good stuff so go on our website you can try our website or try out our community for 14 days free the link will be below but again the real world stuff you know is taking what I'm showing you here in this video practicing it and that's where you can kind of open a virtual account come and trade in our trade room practice trading our watchlist and our trade alert setups until you really feel comfortable because it takes a while again especially trading penny stocks the emotions of the pumping up and dropping back down you know can be very volatile so you have to give yourself the time that trading deserves it doesn't happen overnight so that's why we always suggest practicing like crazy making hundreds of paper trades and we give you the tools again our watchlist will help be your guide our setups will help you with what to look for open a virtual account come into our trade rooms watch us trade these stocks live and teach you live and you know let us help you kind of in our community to make a trading more friendly and easier having that community of support to help you so again keep an eye on our Penny Stocks course we'll have a lot more videos that'll go into it and we will see you in our community enjoy

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