My Secret Formula for Finding Penny Stocks Pre-Spike
Traditional stock traders buy low and sell high…
But my students take things one step further, both buying low and selling high… and then selling short when prices begin falling and buying to cover.
This lets us make a profit both on the way up and the way down.
But there’s one question you have to be able to answer to do this:
How do I find penny stocks before they spike?
The ability to tell when a spike is occurring is huge for penny stock traders.
Unfortunately, there’s no guaranteed rule that’ll tell you what every stock will do, in every situation (and if you find something like that, give me a call!).
But there are a number of signals you can use to predict when a spike will happen.
I’ve developed these over 15 years of trading penny stocks.
Learn them. Love them. And use them to make yourself a better penny stock trader.
If you want to find penny stocks pre-spike, follow these four rules to spot them before anyone else…
Rule #1 – Piggyback on stocks that have already spiked a little
One of the quickest ways to identify a spike in the making is to start by finding a stock that’s already moving.
Think about it…
Which would you rather do?
Sit around staring at empty charts, waiting for breakouts to appear out of thin air?
Or would you rather use the many research tools out there to find stocks that are already moving?
I’ll give you a hint – one of these strategies takes a whole lot less time than the other…
Rule #2 – Look for potential breakouts that are reaching new highs
I’m always looking for stocks that are breaking out to new highs – especially those that are still up on the day and holding the morning high.
But you have to be careful with this–if you see a play like this on a Friday afternoon and the stock’s still holding its morning high, there’s always the potential for a short squeeze into the close there.
Friday short squeezes is a play that all penny stock traders need to learn to recognize and avoid.
Rule #3 – Bet on price action
Here’s how a lot of people try to predict that a spike is happening…
They hit up their favorite chat room to see which stocks other members think are moving or how high they think certain stocks are going to go.
Or maybe they buy alerts off another “guru” who tells them when to buy based off the spikes they’re predicting.
Now, I’m not saying that chat rooms are all bad…
But ultimately, chat rooms are just that – places for conversation. What you really need to bet on is a stock’s price action.
Price action gives you the real story about a stock.
Is it breaking out to a new high?
Has it crossed its volume weighted average price (VWAP)?
All the news sites in the world won’t tell you when these things happen…
But a stock’s chart movement will.
Rule #4 – Do your research
I hate to say it, but a big reason most penny stock traders fail is because they’re lazy.
Most penny stock traders won’t do their due diligence.
And that’s why most penny stock traders will bankrupt their portfolios.
Don’t be like most traders.
There’s nothing fun or sexy about me recommending that you do your research.
If I was trying to sell you a get rich quick solution, I’d fail, because there’s nothing get rich quick about my approach.
But do you know what my approach does involve?
If the rules I’ve listed above tell you anything, it should be that I don’t make a move unless there’s a damn good reason.
I don’t buy into a stock because I read online that I should.
I only make a play when the signs line up and when my research tells me that the setup I’m looking at meets the criteria for my patterns.
I like to think of myself as a retired trader.
I’m not going to come out of retirement for a so-so stock play – just like a retired athlete isn’t going to come back to play for a minor league team.
I don’t waste my time, and neither should you.
The rules above show me when good opportunities are happening.
I listen to them because they’ve shown me time and time again that I can make good money if I stick to the system that’s helped me make me millions of dollars in trading profits.
Editor, Penny Stock Millionaires