Observation Only

Liquidity near zero. Bid-ask spread can be 10–20%. Any move is meaningless. Watch, record, do not trade.

Screening Window

Run your scanner. Verify catalysts in SEC EDGAR. Check if volume is steadily climbing vs one-shot spike.

Confirmation Zone

Most important window. Is pre-mkt gain expanding or fading? Is volume accelerating? This determines if it's real.

Open Explosion Window

Highest risk, highest reward. Most daily highs happen here. Wait for first 1-min candle to close before entry.

Strategy A: Pre-Market Limit

Set limit order at 9:25 AM slightly below last pre-mkt price. Pros: no open-candle slippage. Cons: may miss if it gaps up hard and never comes back.

Strategy B: First Candle Confirm

Wait for 9:30–9:31 candle to close green with volume. Enter on second candle open. Safer but you pay a higher price. Filters most false breakouts.

VWAP Entry (Intraday)

For intraday spikes: wait for price to cross and hold above VWAP. First VWAP reclaim after a pullback is the cleanest entry with tight stop.

Never Chase

If a penny stock has already moved 30–50% and you weren't in, do not buy. The risk/reward is gone. Wait for the next setup. There is always another trade.

Stop Loss Rules

Set stop BEFORE entry — not after. For pre-mkt plays: place stop 5–8% below entry or at pre-mkt low. For intraday: stop below VWAP or below the spike candle's low.

Take Profit Levels

Take 50% off at 2× your risk. Move stop to breakeven. Let the other 50% ride with a trailing stop. Minimum risk:reward = 1:2 before entering any trade.

Float Size = Volatility

Float under 5M shares = violent moves both ways. A single sell order can move price 20%. Size your position accordingly — smaller float means smaller position size.

Position Sizing

Risk max 1–2% of portfolio per trade. Focus 2–3 highest-score names rather than spreading across 10 names. Concentration into best setups beats diversification here.

FDA Catalyst ★ Strongest

FDA approval, fast-track designation, or PDUFA date. Biotech penny stocks can move 100–500% on FDA news. Verify on FDA.gov directly.

Earnings Beat

Small caps react violently to earnings surprises. EPS beat + revenue beat + raised guidance = triple catalyst. Check on SEC EDGAR for actual filing.

News / Contract

Read the actual press release, not just the headline. "Letter of Intent" ≠ signed contract. "MOU" ≠ real deal. Vague PR = high fade risk after open.

Short Squeeze

High short interest (30%+ of float) + sudden buying = shorts forced to cover, amplifying the move. Check short interest on Finviz or Yahoo Finance.