Stock screeners are one of those fundamental tools for online trading that everybody should use. It’s crazy imagining how to succeed without one in a market so packed with opportunities. However, what about in the case of penny stocks? Do screeners still apply, and if so, how do you use them for maximum gains?

What Is a Penny Stock Screener?

A penny stock screener is a tool that lets investors filter or search through different penny stocks and study information about them. There are no stock screeners made specifically for penny stocks. The term typically means using an ordinary stock screener with parameters set to only search for penny stocks.

Just in case, here’s a quick recap: Penny stocks are stocks being traded for less than $5 a share. Other names include micro-cap stocks, micro stocks, small cap stocks, etc. The main appeal of penny stocks is their volatile changes in value. For example, buying stocks at only $0.10 a share and then selling them for $1.50 a share would be a beautiful profit. However, with those significant jumps in value come an increased risk of losing money. They are high risk, high reward, and this is where stock screeners come into play.

Why Should You Use a Screener for Penny Stocks?

Screeners are extremely useful and should be used every day you trade, but why? For one thing, they save time. Instead of trying to look up individual stocks one at a time or studying the market in less targeted ways, screeners let an investor dictate exactly what they want to track, using filters that they can repeatedly use every day.

It can be difficult to find information about penny stocks and the companies offering them. Penny stocks usually belong to smaller companies that are less established, newer, and have less of a track record on the market. Stock screeners allow a trader to segment the vast ocean of potential stocks into a simple watchlist containing only those that might interest them.

A screener can help you find the best stocks for your strategy based on factors like:

  • How bullish (likely to rise) or bearish (likely to fall) they are.
  • Specific industries or sectors, such as biotech.
  • Recent growth and momentum.
  • Market cap size.
  • Minimum or maximum intraday price.

Those requirements are only the beginning. A good stock screener will offer a vast collection of parameters to find the exact type of stocks that fit your current strategy. There is no reason not to use them, regardless of the stocks you trade.

What Is a Good Penny Stock Screener?

There are several paid stock screeners that get penny stocks down to a science, and the price for such an essential tool may be worthwhile. There are free options, as well, and paid ones with simpler, free versions. Here are a few strong choices:

  • Yahoo offers a free stock screener with a good range of search parameters. It isn’t the most adaptable or flexible screener, but it’s simple enough to help a beginner understand the process and grow familiar with it.
  • Finviz is a paid stock screener that also offers a free version with less frequent updates. Finviz is good for swing trading and does a great job of consistently providing more and more useful information as you narrow down your search.
  • The Motley Fool includes a free screener that’s great for independent searching. It also gives the user access to the community’s collective news and information, offering helpful guidelines such as star ratings by Motley Fool users.
  • Zacks offers a free screener with an impressive degree of parameters and metrics. The tool lets users screen for highly specific values and features parameters even some paid screeners don’t offer. On top of that, Zacks makes it easy to save your search results and export them to a spreadsheet for future reference. The full power of this screener is hidden behind a premium fee, but what’s offered on the free mode may convince you to pony up for the full version.
  • StockstoTrade is a popular all-in-one trading platform with its screener, which you can access once you’ve bought a plan. This might be the best choice for penny stock trading, in particular, thanks to its built-in and rapidly updated screener tools.

In general, the best screeners for penny stocks will give you plenty of knowledge on volume (how many shares are being traded) and volatility (how dramatically the stock rises and falls). For example, if a trader finds a volatile penny stock with a limited supply of remaining shares that can be bought, and the company is doing well, the limited supply will likely raise the price even more. If the trader bought into such a stock earlier, they could sell later on when the stock reaches a peak price.

How to Screen for Good Penny Stocks

There is no one perfect way to make money with securities, and that is equally true for penny stocks as it is with anything. Every success story is going to be different, so you need to avoid the urge to follow generic advice to the letter. Real success will come from getting used to screening for certain penny stocks that work for you and building a routine.

One good place to start is tracking price performance. If a stock isn’t moving up or down very much over time, there’s little potential for growth. With penny stocks, this should be easier, since they are known for dramatically rising or falling.

To begin, you could open up your screener and search for penny stocks that had a significant gain over the past day or the current day. If you find a stock that has risen by 25% over a single day, if not more, you may want to watch that stock and try to buy it.

Sometimes, a trader might find a penny stock on the rise and research the company. Then, if the news around that company is very promising, such as the company making a major deal with a larger corporation, it may be worth investing in that stock on the hope that it rises above the penny stock threshold. Just imagine the gains made from a stock bought at only $0.05 a share being sold later for $15 a share. Even with a smaller account and smaller investments, trades like that can lead to incredible growth.

In general, researching the companies before you choose to buy or sell is critical with penny stocks. Most penny stocks are offered by newer, fledgling companies, and most of those companies will fail. Being able to spot a winner in the early stages and then cash out at their peak is the key to making a profit. Now, it’s easy to get lost in research, but consider making a list of basic questions and finding answers to them. For example, on a penny stock you’re thinking of buying, the questions could be:

  • What industry is this stock in? Do you have experience trading in that industry?
  • Is the company spoken of positively in industry circles?
  • Is the company undergoing any changes, and do these changes seem wise?
  • Have any breaking news or media events happened covering the company?
  • Are there rumors about this company’s future, and are they positive?
  • Has the company signed a deal with, or is in talks with, a larger company?

A good stock screener will have curated information that helps answer these questions. For example, many good screeners have an intraday trading range outlining how dramatically a stock climbed or fell in the day, plus related news. A good penny stock trader has an eye for which companies are on the long-term rise, as opposed to companies that are likely to drop back down after a daily high.

Remember, a good trader doesn’t just search for penny stocks, find one that seems promising at the outset, and invest in it right then and there. Find stocks that seem promising just on the numbers, research them for a little while, and form a game plan. If a company is going through a scandal, it’s probably going to drop its stock value, so you could follow this news and buy in as soon as you think the stock is likely to climb back up.

Finally, remember that in exchange for greater rewards and faster turnaround, penny stocks carry greater risk. They require nerve and mental endurance. Invest wisely by diversifying into multiple stocks, sticking to a plan that doesn’t risk too much, and most of all, only hold stocks if you have confidence in them. When in doubt, sell before you lose your investment.

Why Wouldn’t You Use a Penny Stock Search Tool?

Anyone with an internet connection is losing money if they are trading without a screener. Time is of the essence in stock trading, especially with penny stocks, so find a screener that works for you and get comfortable with it, and don’t be afraid to try out several until you find one you love using. If you’d like to master penny stocks to secure your future, build a comfortable nest egg, or just capitalize on the incredible wealth that awaits you, download the Ultimate Penny Stock Playbook by Jason Bond for free while it’s still available.

Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

Learn More

Leave your comment