What's up everybody? All right? So today we're going to talk about day trading terminology and the term of the day is penny stocks and how to make a living trading penny stocks. Now this is a question that a lot of traders asked me when I first started trading I gravitated towards penny stocks and why would that be? It's because I didn't have a lot of money and I didn't think I could afford to buy stocks like Apple Microsoft you know Caterpillar And I also figured that if I was trading stocks like that, you know most mutual funds they only make five maybe ten percent in a single year. So trading a stock like Apple you know with a $5,000 account, 10 percent is 500 bucks. I'm not going to spend all my time to make 500 dollars in a single year I need to be making 500 dollars a day.

So that meant that I needed to focus on an area of the market that was a lot more volatile and that I thought had more potential. And so I thought penny stocks. You hear about people who have traded penny stocks and made hundreds of thousands of dollars and so I thought maybe that was the place to go. Well, I didn't realize when I first got started how long it would take me before I would find any success as a trader.

Took me 18 months of trial and error and I lost over $30,000 during that time in my life. It was very frustrating I kept losing and losing and losing. In fact, only 10 percent of the traders out there who try to trade the markets will be profitable. So you know for me at this point, I've now gotten over that learning curve and so what I'm going to talk about today are a couple of the different tiers of penny stocks and how you configure which ones are higher risk and which ones are lower risk.

So why should you listen to me? Well, I'm a trader who in the last 12 months has made over two hundred and twenty thousand dollars trading stocks and a lot of those stocks were penny stocks. In fact, during the summer of 2016, I made ninety four thousand, one hundred and nineteen dollars trading stocks and many of them again were penny stocks. at the end of the summer I did an interview in that interview appeared on The Huffington Post You can see I verified all of these trades with my broker statements to show you that the trades are real and the gains are real. That article here on The Huffington Post You know was about the three that I spent trading the markets.

This for me was a, you know, a great stretch. It was a really great hot streak and really all of this is to say that I am someone who trades the market profitably and I figured out a way to make a living trading stocks and many of the stocks I trade are penny stocks. all right. So the most important thing for you to understand is how to differentiate the high risk penny stocks from the low risk penny stocks.

And of course, all of this is relative. Day trading is riskier than long-term investments, but a lot of us come into the market knowing that there's more risk and and looking for that you know risk to reward potential. I'm willing to risk money to make money and this year I've done really well. Alright, so what are penny stocks? Well, the SEC considers penny stocks to be any stock trading under three dollars per share.

and that's why a lot of the stocks I trade would be considered penny stocks because they're between a dollar fifty and three dollars. I Personally focus on trading stocks between a dollar fifty and ten dollars. So that means some of the stocks I trade technically are penny stocks even though they're not penny stocks in the literal sense. In the literal sense, a penny stock, of course, would be a stock trading below one dollar, and these are generally some of the riskiest stocks to trade in the last 12 months, the 220,000 dollars I've made has come not from stocks trading at 10 cents 20 cents, but from stocks trading between $1 and 10 dollars and many of those would be considered penny stocks.

All right now, we'll talk a little bit about the different exchanges that Penny Stocks trade on. Some of them trade on NYSC Amex and Nasdaq exchanges, but most of them don't. All right, The National exchanges require all stocks to trade over $1 Now, if a stock falls below $1 for a period of time, that's fine. They'll get a notice saying you gotta get your stock back up above $1 and if they can, then they continue to trade on that exchange.

If they can't, well, then they risk getting delisted. So let's take a look at some of the stocks that I've traded over the last few months. This is a stock AVO that went from $1 80 up to 3 dollars and 60 cents in one day versus the previous day's close. This went up over a hundred percent and this right here was a listed stock.

This is on the National exchange. This was easy to trade. Lots of liquidity, millions of shares of volume, easy to buy, easy to sell, and there are traders who easily made tens of thousands of dollars trading the stock. On this particular day, we trade the simple patterns.

the first pullback right here. the second pullback right here. Here's another stock again, from a dollar ten to two dollars in one day. a 100% intraday move.

So this is to say to find big percentage gains, you don't need to look at penny stocks in the traditional sense of being under a dollar. You can get big percentage gains from stocks trading between one and ten dollars. All right and again, the entries here are very simple. The first pullback and the second pullback.

here's another stock from four dollars up to six dollars and 20 cents. Right off of our High O Day scanners, we use these scanners to search the market for stocks that are moving up quickly and whenever I see that I look for an entry. This entry here was at 4:50 at right after that little red candle. the first candle to make a new high O is my entry and we've got the move all the way up towards 620.

Again, an opportunity to make easily tens of thousands of dollars. And if you find a couple trades like this each week, you're going to do really really well. Here's another stock from about 340 up to 433 clean flat top break out over $4 and then first pullback here from 418 up to 433 Simple patterns. We teach these patterns and trade them every single day in the chat room.

Here's another stock from a dollar 40 up to 308. a 100% intraday move. This for me, represents an opportunity, right? The only question is whether or not you have the skill to capitalize on this type of opportunity. When it presents itself, we see stocks make these kind of moves day in and day out.

Here's a stock that went from two dollars to six dollars and 80 cents in one day. Look at that. I mean that's an incredible opportunity and these entries are not that hard. The first pullback and the second pullback.

there's four thousand, three hundred and ninety dollars in profit in one day. That right there is more than most. Vermonters make an entire month. So to be able to do that in one day and really in just the period of about an hours is pretty impressive.

That's the potential of the market that for me is the potential of trading small cap stocks. This is a penny stock in the definition. you know buy Based on the SEC definition, it's started below three dollars. And look at the move it made.

This is a stock that I felt comfortable trading with large size. This is not a company that's you know, pending bankruptcy or trading it. You know one or two cents per share stocks that are trading at one or two cents per share. Generally speaking, are some of the worst companies on the market.

If they were good companies, they wouldn't be trading at such a low price. Here's another one moved from two dollars up to nine dollars in one day, right? That's pretty crazy. We asked some of the traders in our chat room whether or not they were profitable on this trade. My entry was at 250 and 86 percent said yes.

You can see here that the first move up entry at 250 pullback here. another entry over $4 for the move up into $9 per share. So these are these are trades where you could go in with 10,000 20,000, 30,000 shares, and some of the most talented traders will easily make hundreds of thousands of dollars in these types of moves. and they only need to do that a couple times a year to be very, very successful.

Here's another stock. This is a little more expensive from $12 up to $19 All right. So this is to say that we see these opportunities all the time in the market and the biggest thing I want to encourage you is to you know, just to let go of that thought. to trade profitably, you need to trade literal penny stocks.

You don't need to trade stocks priced it. You know, one to three cents per share in order to make money trading the markets. Now penny stocks. This is an important thing.

The minimum tick rule will affect penny stocks. So stocks that trade over $1 trade in one penny increments. And you can see here this is a stock that'll trade I Mean it has a bigger spread right now, but it can trade in increments as small as one penny, so it could be a 381 by 382 or something like that. Well, when stocks trade under $1 they trade in four.

They've got four decimals though, so they trade in one hundredths of a penny. which is pretty crazy. All right. So that means an 80 cent stock might look like this point.

Eight, One Nine nine. This $0.26 stock is 26 by twenty Six to seven. All right. So this further breaks down the penny stocks.

And this is for the simple reason that you know, if you had a a penny stock trading in a one penny spread, the spread would become a very large percent, right? A stock trading one cent by two cent has I can go up a hundred percent just as soon as it goes up one tick. So this creates a little bit more market depth. It allows for more buyers to line up in between each penny. In fact, it allows a hundred places for them to line up in between each penny.

Now I Prefer obviously to trade stocks above one dollar. So the stocks that I'm trading, they all have your typical 1 cent spread. In 2001, the market underwent decimalisation and before that, stocks traded in fractions. So when we had decimalisation, that really changed the market a lot.

because instead of having a minimum spread of six point two five cents, the smallest spread went down to just one penny, right? So when you had spreads of a quarter, you had twenty five cent spreads. You had spreads of 1/8 There was a 12 point 5 cent spread. You have trade, you have spread of 1/16 It's a six point two five cent spread. All right.

So now the spreads are much tighter and that means that buyers and sellers can get stacked up on both sides and you can see here. It would actually take a lot for this to move all the way to 27 cents because of all the sellers that are lined up in the 100 places between 26 and 27. So for that reason, I Actually don't feel that most of these penny stocks will move as quickly as stocks like this priced above a dollar? These will move faster. Look at, this can move from 81, 3, 81 to 386 almost instantly.

right? It would take a very, very long time for this to move 5 cents. Now there are a couple different exchanges where penny stocks will trade. Yes, some penny stocks are on NYSC and Nasdaq. These are docks that have fallen below $1 per share.

You know there is the requirement that all of the stocks on the NYC and Nasdaq trade above $1 per share. but if the company's shares fall below $1 for a period of time and then come back up above it, you know it's it that mean nothing might happen. It might just be fine. But if the company stays below $1 for a long enough period of time, they can receive a delisting notice from the exchange.

And what they're saying is that if your stock isn't above $1 by this date, you're your company's going to be pulled off the exchange, You're going to get delisted, and you're going to be moving to the OTC exchange. That's really the opposite of growth. It's not a good thing for the company. they don't want to get delisted so there are a couple different things they can do.

They can try to perform well and have the stock get priced above $1 If that doesn't work well, they can do a reverse split. A good old reverse split and we see this all the time with small cap stocks. This is A. This is one that's been particularly ridiculous.

GBS N with all the reverse splits, it would actually be priced up here at 43,000 dollars per share at the high of the spike. But you know what? When it and right now it's trading it one penny, it keeps dropping down and they keep doing a reverse split. So how does that work? Well, If a stock is trading at 50 cents and they do a ten to one reverse split, let's say you're holding 10,000 shares at 50 cents, they're going to take that 10,000 shares and they're going to turn it into a thousand shares priced at five dollars. Okay, so all of a sudden your 10,000 shares turned into a thousand and you're holding the stock now at five dollars.

So in effect, nothing really happens. It's the price hasn't really changed, it's just changing the outstanding shares and adjusting the price right. Shareholders value hasn't changed, but the price. The stock has changed to keep it above the $1 minimum and to keep it in compliance.

Of course, if the stock then goes from five dollars back down to a penny, they got to do a reverse split again and they do that again and again and again. And that's why you end up seeing stock charts like this that just keep going lower and lower and lower and lower. all right now. Eventually, this stock may not be able to do another reverse split and they may get delisted.

All right, and they will probably move to the OTC market. So once the stock has been Dilys delisted, it will move to the OTC market. Although oftentimes stocks will list on the OTC market and never appear on national exchanges like NYSC or Nasdaq because they don't, they can't meet the requirements. All right, the requirements to be on either of those exchanges are really high.

They have to be fully transparent. They have to show their earnings, the accounting, and all of that stuff. But with the OTC market, well, regulations are. You know, there's still some regulations, but the requirements to get listed are a lot lower Now, In recent years, the OTC market has changed a lot, especially in the quoting system.

It's made the electronic quotes available on most stocks, so liquidity has improved. but in the past, liquidity and order execution times were very slow compared to NYSC or Nasdaq. So you know, the OTC exchanges may have a combination of electronically quoted exchanges, but also broker-dealer networks that aren't even listed. So as a result, you know the OTC markets are not as transparent for traders or investors and that means the risk has increased.

The risk is going up all right now. There are several tiers of the OTC market, and those tiers help traders understand the type of stock they're trading. Now, these tiers separate the companies that are you know not great to the ones that are like really bad when it comes to providing disclosures, providing earning statements, and meeting the the requirements to be listed. These are the three tiers of the OTC Markets.

You've got the OTC QX which is the best market, then you have the oTCQB which is the venture market, that's the so-so and then you've got the Pink Sheets right? the OTC pink, and these are the rest of the stocks. They don't meet the Otcqx and they don't meet the oTCQB standards, and they're also subdivided into categories of kind of like crappiness. I mean some of them are really, really bad, and this is where a lot of stocks become subject to manipulation. If someone wanted to manipulate the market, they would most likely use an OTC stock.

All right, and we'll talk about that more in a little bit. now. The important thing to understand is that the OTC QX the best market. This is the sort of the highest quality of OTC stocks.

They do have to meet pretty high financial standards. They have to follow best practices They have to maintain compliance with. you know, securities laws and government agencies and stuff like that. And you know these are supposed to be some of the best stocks on the OTC market.

Now the venture market is the sort of development stage and these are stocks that aren't able to qualify for the best market but are still doing reporting, undergoing annual verification and you know they're meeting some standards of transparency in the in the hope that they will move up to the best market. These companies also must meet a minimum price of one penny, right? And they can't be bankrupt. They can't be in bankruptcy. Now the pink Sheet stocks are.

you know, these are also subdivided into categories and essentially the important thing to know here is that any stock that is listed in the Pink Sheets is going to be a stock that doesn't have and doesn't offer a lot of transparency. and we really might not know a lot about the company, how much they make their total net worth, how many employees they have and stuff like that. Now the fourth tier of the OTC market is the OTC Gray market and this is I guess even lower than the Pink Sheets and the pink Markets. This is where stocks are not able to publicly quote the OTC securities so they're not even being publicly quoted and they're not going to be electronically traded so for the most part we wouldn't even see them.

which is why I didn't include them on this in the images there. All right. So now, traditional penny stocks, right? Traditional penny stocks would trade between a penny and 99 cents. right? That's a penny, right? So it's a penny stock.

Well, they continue to trade any increments of 1/100 of a penny. And you know, as long as they continue to trade above 1 penny, they will be traditional penny stocks. and you may see them on NYC and Nasdaq exchanges from time to time. So you know if they haven't received delisting notice yet.

But some of those companies, they may be near feet facing bankruptcy. They are not in very good financial standings. Otherwise, their stock would not be priced at, you know, a penny or two pennies or whatever it might be. So generally speaking, they are among some of the weakest stocks in the market, and they very rarely represent good investment opportunities, so that's not something that I would trade.

Those are not the type of stocks that I traded to make two hundred and twenty thousand dollars in the last twelve months. Now when you look at penny stocks, I always have my level two quoting just in two decimals because I don't trade the sub pen or the sub one dollar stocks. But you can see here these two stocks are listed on national exchanges and so you can see Nasdaq as a market maker right here. and you can see Let's see.

this one will have. Well, it's got bats. It's got ARCA It's got edge, so you know both of these Nasdaq is here on the side. Both of these are listed, whereas these two stocks are on the OTC exchange.

So you're not going to see NY, IC or Nasdaq as market makers creating the market. You're going to see a different group of you know, broker dealers and market makers providing the market for these stocks. And sometimes you'll recognize that one of these guys is almost completely controlling the price action. That's part of the manipulation that we can see in the OTC market where one market maker, one broker is really controlling the price.

Now, this is a sub penny stock. So any stock trading below a penny. right Now this the stock is trading between a tenth of a penny and nine tenths of a penny. So it's a sub penny stock.

It's just below a penny. But it's not. It's not one hundredth of a penny. it's a tenth of a penny.

And you can see here the sub penny stocks. You've got the two decimal points, the two zeros, and then now we're at 1/100 of a penny. All right. You can see these stocks.

for the most part. Their charts are almost unreadable. Very, very little price action. Very little volume.

The only time these usually get volume is when a message board or something like that starts. kind of promoting the stock or pumping them up. It's not something that I would ever trade. And then you've got the Trip Zero stocks.

All right. This, These are the stocks that are trading in one hundredths of a penny. These stocks are priced between 0.01 so the triple 0 and 0.0 0.4 So, as you can imagine, these types of stocks are often used for manipulation because if a stock goes from point Zero Zero Zero one up to point Zero Zero Zero Two, it moved up 100 percent. So many of the quote unquote hot penny stock alerts are on sub penny stocks or Trip Zero stocks, and they primarily benefit the people who first bought the stock.

Let's just say, for instance, someone buys a hundred million shares of the stock At Point Zero Zero One, That's ten thousand dollars. One hundred million shares. But it's only ten thousand dollars. Well, if the stock goes up to point Zero Zero One, it's actually gone up enough for them to make a hundred thousand dollars.

If they put in a hundred thousand dollars, it would go up enough for them to make a million dollars. And that's why you see a stock promotion and you know the pump and dumps in this price range because it doesn't take a lot for these to move up significantly. Having said that, these rarely have the liquidity to buy a hundred million shares, and who wants to do that right? I certainly don't And this is why traders who really are making a living in the market are never trading these stocks. They look like this, right? And look at how many shares you have on either side.

This traded three hundred million shares day. but this is what the price looked like all day long, right? There's nothing to trade here. You can't trade this now I actually saw this stock because I saw it was on message boards is getting you know promoted a little bit and you know people are saying oh, it's going to go back up It's like give me a break I mean is it really going to go back up This thing is at the bottom of the barrel I Guess it has nowhere to go but up. but this is not something I would ever put my money in and the other place it could go is delisted, gone bankrupt, and the money's gone.

Alright so I have found in my years of trading that I can reduce my risk in the market by focusing on stocks listed on NYC on NASDAQ Amex Real stocks, real companies and those are stocks that they're going to face the requirements to put out earning statements to be very transparent. they're less likely to be used as vehicles for this type of manipulation that you see in the sub-zero and triple zero sub penny and triple zero penny stocks. Okay, now as you can see from, you know some of these charts and and also some of the charts of the stocks that I traded earlier. You know, being a profitable trader, you don't have to trade traditional penny stocks.

You can trade stocks price between $1 and $10 and you can do really well. I had an account in one month that I grew from a thousand dollars to eight thousand. six hundred and fifty three dollars. And it wasn't trading penny stocks in the traditional sense.

it was trading stocks between $1 and $10 per share. right? That's a 760 percent gain. and I didn't have to worry about buying a million shares of a you know, stock priced at one penny. I Feel comfortable putting my money into these stocks.

And the other thing that you have to realize is that for me, this is a strategy that's scalable because I know when I'm trading stocks that are liquid I can buy and sell larger amounts of size. You know when you have a stock let's say like a Koa or a Kao, this is a stock that in the last few weeks has gone from. you know, five dollars up to sixteen dollars. It's a 300% move.

It's on millions and millions shares of volume. so this is a very very liquid stock. Now for me, I may only buy 5,000 or 10,000 shares, but other traders who are maybe have bigger accounts than me, they might feel comfortable taking 50 thousand or a hundred thousand shares. and on those types of moves, they could make four hundred or five hundred thousand dollars.

and they're doing it in a 100% legal way. A 100 percent ethical way. Trading a stock that's simply strong because it has a catalyst and you could never do that trading penny stocks. So if you learn how to trade the stocks between $1 and $10 and you can be profitable, if you can make $20 a day and then scale that up to 50 and then a hundred, and then 200, you're on the same path as me.

That's what I did I start with 100 a day, built it up to 200. Next thing I know it was four hundred, five hundred and now on my best days I make five, maybe even ten thousand dollars. To the point where I made ninety four thousand dollars over the course of three months trading stocks like this. You know, a stock that a couple weeks ago was priced as a dollar ninety one.

Big news surged up to five dollars, pulled back a little bit, squeezed up to six dollars. That's like five six hundred percent game. and we see this happen all the time, right? So you can make a living trading penny stocks. but it doesn't have to be the the sub, the sub penny, the trip zero stuff.

You don't have to mess around that stuff. I Don't know a single profitable trader who trades those types of stocks. Alright, so if you're thinking about trading penny stocks, make sure you step back a little bit and you think about the big picture. The big picture is that if you want to build a career that you can potentially be doing for the rest of your life and I say this.

We've got a student who joined our room just this week who's 81 years old, he's been trading. This is his career. He's been doing this his whole life. You can do this for the next 30, 40, 50 years of your life.

So set the foundation that's scalable and for me that's based on trading stocks between $3 and $10 And then if I want to trade stocks between $10 and $30 now I've got the account size to do it and the same principles apply. So I can trade a stock like you know Tesla or I can trade in a Nvidia This is a higher price stock but you can see this is this is a pretty strong one today and it had a lot of opportunities. So you know once you've built up your skill now you build up your account and you can scale the strategy to any price range. and then next thing you know you are buying Apple, IBM and Microsoft and you're trading the strongest stocks on the market.

All right guys. So I hope this has helped you understand penny stocks if you have any questions I'd love to have you comment below. I'll make sure to come back and answer them as soon as I See them all right? Thanks guys! Let's be honest, if you made it this far, you must have really enjoyed that video. So what's stopping? You subscribe right here and get email alerts any time I upload new content.

until then. Happy surfing!.