Stocks Under $5
Best Stocks under $5 is a list of trending stocks under $5 and above $4. These stocks are trading on NYSE, NASDAQ, and AMEX and sorted by percentage gain of the day so traders can easily see the top stocks under 5 for today. Use the Top 10 Penny Stocks for trading ideas.
Best Stocks Under 5
The top stocks under $5 list is updated daily after market close. Please check back for the newest low price stocks.
Are Stocks Under $5 Worth The Investment?
There are many stocks under $5 that are worth watching for traders with a small account. Let's face it, one share of Amazon stock costs over $3,000. If you have only $2,000 to invest, you cannot even purchase one share of Amazon stock.
That is is not to say Amazon stock is not a good stock, or you shouldn't be buying high price stocks. In fact, it's the exact opposite. Expensive stocks are trading at high prices for a good reason, they are usually better, safer, and have more potential to grow over the long term. These companies usually have stronger fundamentals, product lines that are not easily replicated by others, a great leadership team, loyal fans of their products. All of these mean the company is making tons of money with excellent income statements and balance sheets.
However, for small traders with limited funds, you may consider stocks that are trading under $5. Some of these stocks may go up much faster than the blue chip stocks. It is much harder for stocks trading at $100 to double up to $200, but a $5 stock may go up to $10 in a much shorter period of time.
Of course, buying stocks under $5 is much riskier, because companies with a stock price of $5 or lower generally don't do well at the moment. The odds of these low price stocks going bankrupt in the long term is much higher than the possibility of doubling up.
For this reason, we are not interested in investing in these low price stocks, these are stocks to be traded for the short term. If we buy any of the stocks, we usually sell them in a short time frame, anywhere from a couple of days to a few weeks maximum.
How to Trade Stocks Under $5
There are various ways to trade stocks under $5, such as the breakout trading strategy and the pullback strategy that we will be discussing below.
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Small Cap Trading Strategies
To make money from trading, we will be utilizing technical analysis and stock chart patterns to swing trade the stock market. If you are new to trading, you may want to read the following articles.
How to Read a Stock Chart
Top 10 Stock Chart Patterns
Introducing Technical Analysis
The tools that we will be using are stock charts and the strategies are as follows. Oftentimes, when a stock makes a massive move and then falls over 60-80%, there is a possibility that stock may make smaller bounces before falling again. The trick is to buy into one of these stocks before the second bounce. Especially, here's the trading strategy that we will be using.
- We will look for stocks trading in the range of $0.8 to $5 on NASDAQ, NYSE, or AMEX. We are not interested in stocks trading on the OTCBB market.
- The stock must be up at least 80% recently, with a single spiked of 30% or more in 1 day. The trading volume must be huge compare to the average trading volume of the stock.
- The stock then falls over 40% from their peak close or 65% from the intraday high with low trading volume.
Here are three recent stock patterns that matched the criteria. All three stocks were taken from November 4, 2020.
If we look at the stock charts of the above stocks on November 10, 2020, we see that all three stocks made decent moves in less than a week.
Please note, not all stocks are going to perform that well and bounce in a week. Most of the time, the stocks either don't move or may even drop further. During those times, we must cut our losses short and move on to the next trade.
We've discussed this strategy in much more detail in Penny Stocks Trading Strategy. In this article, you will learn how to set stop loss and time loss, as well as when to take profit. Trading psychology is another topic we've talked about which is a critical factor in trading stocks under $5.
A sound trading strategy without knowing anything about trading psychology is not enough to be the market. One may have the best strategy in the world, but if he fails to execute trades at the right time is going to lose money.
When we look at the stock charts and technical analysis without investing any money, we all can think logically. However, as soon as we have our money loaded on stocks, we act differently. All of our thinking may be based on how much we would make or lose on a trade instead of focusing on the pattern itself.
We should treat the stock market calmly and if we are confident with our trading decisions and system, we will make money. On the other hand, if our decisions are based on fear and greed, we will lose money.
How to Find Hot Stocks Under $5
You can use our free stock screener to scan for hot stocks under $5. Our stock screener gives you the option to scan for popular technical indicators and find stocks that match these patterns.
Some of the technical indicators that you scan for are price and volume actions, moving averages, candlestick patterns, stochastic oscillators, RSI, MACD, and many more.
You can read the following article on how to use our stock screener and find stocks for swing trading.
How to Find Stocks For Swing Trading
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