How To Find Penny Stocks Before They Explode

How much time do you spend looking for good penny stock ideas? Are you tired of searching through hundreds of websites and reading countless articles? 

Penny Stocks are shares of companies that trade at less than $5 per share. They are often considered to be riskier investments because their price movements are unpredictable.

How To Find Penny Stocks Before They Explode

Penny Stock Screener is a free tool that helps investors find great penny stock opportunities.

The tool scans over 50 million public US companies and finds the ones with the highest potential upside.

Find out everything you need to know about Penny Stocks below! 

What Are Penny Stocks?

A Penny Stock is an equity security that trades below $5 per share, or $50,000 in total market capitalization. These securities are also referred to as micro-cap stocks, nano shares, or nano-stocks.

The idea behind penny stocks is simple: You can make money by buying them for just one cent more than your purchase price.

That’s right — penny stocks offer incredible profit potential. But there are many challenges involved with trading these low-priced stocks.

Penny stocks are used as volatile instruments to produce profits within shorter periods. Buying penny stocks can be extremely risky. It takes a lot of patience and experience.

Also if you don’t know what exactly you are doing when investing in penny stocks. Please be careful and don’t invest money which you cannot afford to lose.

Where To Find Penny Stocks?

You can use regular stock exchanges and OTC Markets to find penny stocks, but you will have to do some research once you find some penny stocks that interest you.

Find out how long the company has been active and what their previous price movement looked like. 

Keep an eye out for news about exciting new products and technological developments, as this will often precede a spike in stock value. 

There are several online resources where people can go to buy penny stocks. One of the most popular places to look for penny stocks is Yahoo! Finance.

This website has thousands of penny stocks listed on it. Many other sites have similar lists.

Some good penny stock brokers allow users to trade penny stocks directly from their site.

How Do I Pick A Good Penny Stock Broker?

There are many different types of penny stock brokers out there. Some charge fees while others don’t. Some only deal with certain types of stocks while others will accept any type of stock.

When choosing a broker, there are a few things you will need to consider. 

Make sure you understand all the fees associated with the brokerage account. Most brokers will charge monthly maintenance fees.

Some brokers may charge transaction fees. Others may charge a percentage of each trade.

Some brokers require minimums up front. If you want to open a brokerage account but don’t have enough cash to deposit, then you might not be able to get started.

Some brokers specialize in penny stocks while others will take any type of stock. When opening a new brokerage account, you need to ask about this upfront so you aren’t surprised later.

Some brokers use proprietary platforms while others use third-party software like InteractiveBrokers or TradeStation.

Think about how you will be accessing your accounts- is the software easy to use? 

Customer Service is another important factor. Will you be able to get hold of someone to help you when you need it? Will support be available 24/7?  How quickly do they respond to emails?

Security is also a significant factor to consider. Find out what kind of encryption the company uses, and how they store their data to ensure it is secure.  

Share Price And Valuation

The share price is the amount of money one share costs. The higher the share price, the more valuable the stock becomes. There are two ways to determine the share price:

How To Find Penny Stocks Before They Explode

1. Analyzing the historical performance of the company over time. You can compare the share price against the total number of shares outstanding.

2. Using financial statements. These include balance sheets, income statements, and cash flow statements.

Valuation is the process of determining the worth of a company based on its current market price. It is done by comparing the company’s earnings to its competitors’ earnings.

Earnings are calculated using the net profit divided by the number of shares outstanding. 

Penny Stocks Vs. Blue Chips

A blue-chip stock is an established company with a strong brand name. They are usually well-known companies that have been around for years.

Their products are generally well-liked and trusted. Blue chips tend to pay dividends.

A penny stock is a small company with a little history. Many penny stocks are start-ups. They are often risky investments because they lack a track record.

Many penny stocks are thinly traded and have low liquidity.

Most people think of penny stocks as being bad investments. But they can make great long-term investments if you know how to research them properly.

So Which Penny Stock Should You Choose?

There are a few things you can try to find a penny stock before it explodes. 

First of all, you can look for penny stocks that are already spiking.

You might not make as much money as people who caught the stock before it spiked, but you could still benefit from riding the wave to its conclusion. 

The next thing you can do is look for stocks that can breakout to new highs.

If a stock is still up on the day or holding morning highs, there’s always the possibility of a short squeeze into the closing bell. 

Short squeezes are plays that all penny stock traders should learn to recognize.

Sometimes when potential breakouts reach their highest point, they can’t hold their price above the previous support level.

You can also let the price action guide your betting. The more that you study price movements, the more competent you will become at spotting price patterns.

As your confidence grows you can begin to bet on what you spot. 


Betting on penny stocks can be challenging and is not without its risks, but it is also a great way to get into the stock market.

Colin Faser
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