Using a Penny Stock Screener to Find Winners

A penny stock screener is a software tool, plain and simple. Its job is to filter through thousands of tiny, low-priced stocks to find the few that actually match what you're looking for—things like a specific price range, a minimum trading volume, or a certain market cap. Think of it as your first line of defense against the overwhelming noise in the wild, but potentially profitable, world of penny stocks.

Why a Penny Stock Screener Is Non-Negotiable

Jumping into the penny stock market without a good screener is like trying to find a needle in a haystack—while blindfolded. The sheer volume of companies trading for under $5 per share is enough to make your head spin, and a huge chunk of them are virtually un-tradable due to a lack of buyers or sellers. A quality penny stock screener cuts through all that junk with surgical precision.

This isn't just about convenience; it's a critical part of a sound trading strategy. The tool automates that initial discovery phase, saving you countless hours of mind-numbing manual research. Instead of sifting through ticker after ticker, you can build a focused watchlist of stocks that already meet your baseline standards for liquidity, price action, and potential.

Filtering Signal from Noise

The whole point of a screener is to apply a set of filters to the entire universe of stocks. For penny stocks, this is absolutely essential because of the unique risks involved.

• High Volatility: Penny stocks are famous for their massive price swings. A screener helps you find stocks with constructive volatility (strong upward momentum) while filtering out the ones that are in a nosedive.
• Low Liquidity: Many of these cheap stocks have so few buyers and sellers that getting in or out of a position is a nightmare. A screener lets you set a minimum daily trading volume, ensuring you only spend time on stocks you can actually trade.
• Lack of Transparency: Information on smaller companies can be tough to find. While a screener can't tell you if a company is solid, it can filter for stocks listed on major exchanges like NASDAQ, which have much stricter reporting rules than the OTC markets.

A classic rookie mistake is lumping all penny stocks together. A screener is the tool that lets you separate the speculative plays with real potential from the thousands of illiquid, high-risk companies that are basically lottery tickets.

Before you start building custom screens, it's crucial to understand the building blocks. These core filters are the foundation of almost every penny stock scan you'll run.

Core Screener Filters Explained

Mastering these five filters is the first step toward building targeted watchlists and moving from gambling to a more disciplined trading approach.

Uncovering Hidden Opportunities

The penny stock market is always changing. New companies are constantly hitting the market through initial public offerings (IPOs), expanding the pool of potential trades. For example, in a recent year, 72 operating companies went public in the U.S., raising a total of $3.72 billion and posting an average first-day pop of 15.3%. A powerful screener can help you spot these newly listed companies right away. You can find more details in this IPO performance data from Warrington College of Business.

By setting up precise filters, you transform the chaotic penny stock landscape into a manageable list of candidates that actually deserve a closer look. This disciplined process is what separates successful traders from the rest of the crowd.

Building Your First Foundational Screen

When you first jump into a penny stock screener, the sheer number of filters can be a bit much. So, where do you start? The trick is to begin with a solid, reusable template—what I call a foundational screen. Its only job is to filter out the mountain of untradeable "junk" stocks.

Forget finding a hidden gem on your first go. This initial scan is all about building a manageable list of stocks that are actually worth your time to analyze. We're going to eliminate the illiquid, highly speculative stuff right from the start.

In ChartsWatcher, we'll build this foundational screen by focusing on three core areas: price, company size, and most importantly, liquidity. These filters are the bedrock of any good penny stock strategy.

This is the basic idea—funneling the huge market down into a handful of real opportunities.

As you can see, you start broad and use your screener to get down to a focused list of potential breakouts. It's a process of elimination.

Defining Price and Company Size

First things first, let's nail down what we even mean by "penny stock." Price is the most obvious place to start. You want to set a range that captures the tickers you're after while ditching the microscopic sub-penny stocks that are often cesspools of manipulation.

A solid starting point is:

• Price: Greater than $0.10 and less than $4.99. This weeds out the absolute bottom-of-the-barrel tickers and keeps us within the standard definition.

Next up is market capitalization, which helps you target companies of a certain size. While all penny stocks are small by definition, setting a floor can filter out the tiniest, most fragile operations.

• Market Cap: Less than $300 million. This keeps you squarely in the small-cap and micro-cap space, which is exactly where that explosive growth potential lives.

These two simple filters will slash the universe of stocks you're looking at. But we're not done. The next filter is arguably the most critical one for your survival as a trader.

Ensuring Tradable Liquidity

Let's be blunt: finding a stock with a perfect chart is useless if you can't get in or out of your position. In the penny stock world, liquidity is king. A stock with low trading volume is a trap waiting to happen, leaving you stuck as the price plummets with no buyers in sight.

To avoid that nightmare, we have to add a volume filter. This ensures there are enough buyers and sellers on any given day for you to actually execute your trades.

A rookie mistake is focusing only on price. I’ve seen traders get excited about a great chart, only to realize its average daily volume is a few thousand shares. They either can't buy a meaningful position or, worse, get stuck when it's time to sell. Always screen for volume first.

Here are the must-have liquidity filters for your foundational screen:

• Average Daily Volume (3-Month): Greater than 100,000 shares. This is your non-negotiable baseline. If you're an active day trader, you might even want to crank this up to 500,000 or more.
• Shares Float: Less than 50 million. This isn't strictly a liquidity filter, but it's related. Stocks with a lower float often make more explosive moves on good news because there's simply a smaller supply of shares available to trade.

By combining these price, market cap, and volume filters, you’ve just built a powerful foundational scan. This is the starting point for nearly every other strategy you'll develop, and you can learn more about refining it in our detailed guide on how to use a stock screener to find investments.

Go ahead and save this scan as a template in ChartsWatcher. It's going to be your new best friend.

Screening for Stocks with Breakout Potential

Alright, you've built your base screen and filtered out the low-quality junk. Now for the fun part. This is where we go on the offensive, adding performance-based filters to hunt for stocks that are coiled up and ready to pop.

The idea is simple: catch the momentum before it's all over the news. We're looking for stocks actively making moves, showing real strength, and pulling in serious trader interest. A good penny stock screener is your best tool for this, turning a sea of thousands of tickers into a manageable handful of real ideas.

Layering in Performance Metrics

To find stocks on the verge of a breakout, we have to look at what they've been doing recently. How has the price behaved over the last week? The last year? Adding these filters helps us zero in on tickers that are either launching a recovery or are already riding a wave of momentum.

Let's add these criteria to your foundational screen in ChartsWatcher:

• Percent Change from 52-Week Low: Set this to Greater than 50%. This is a great filter for finding stocks that have clearly found a bottom and are already in a new uptrend. They've proven they can move.
• 5-Day Price Change: Set this to Greater than 15%. This hones in on stocks with a serious short-term surge, a classic sign that something is happening right now to get the market’s attention.

These two filters alone will slash your list down to stocks showing relative strength. You're not just looking at cheap stocks anymore; you're looking at cheap stocks that are actually moving.

The Critical Role of Volume

Price is only half the story. A stock can drift up on low volume, but that’s often a weak, unconvincing move. Real, sustainable breakouts almost always happen on a massive spike in trading volume.

This surge in volume shows conviction. It means a huge number of traders are piling in, providing the fuel needed to push the price higher.

Volume precedes price. A sudden explosion in trading activity is often the very first clue that a penny stock is about to make a big move. Ignoring volume is one of the biggest mistakes new traders make.

To catch this, we’ll add a powerful volume filter. It compares today’s volume to its recent average, instantly flagging any unusual activity.

• Today's Volume vs. 20-Day Average Volume: Set this to Greater than 2.0x. This tells the screener to only show you stocks trading at least double their normal daily volume. It’s a dead giveaway that interest is surging.

Combine a 15% price jump with a 2x volume surge, and you’ve got the recipe for a potential breakout. This is exactly the kind of setup a powerful penny stock screener is designed to find.

Putting It All Together: A Real-World Scenario

Let's imagine you run this exact scan. The results might show a stock at $1.20 that's up 18% in the last five days. But here's the kicker: it has traded 1.2 million shares today, while its 20-day average is only 400,000. That's a 3x volume surge.

These aren’t just random numbers; they are clear signals that something fundamental has changed for this company.

This is where the real opportunities are found. History shows that catching these movers early can lead to some incredible returns. Analysis of just one week back in May 2021 found that certain penny stocks delivered short-term gains as high as 496.71%. These are the kinds of explosive moves our multi-layered breakout scan is built to uncover.

Of course, the screener just gives you the starting lineup. To really refine your process, check out our guide on using a breakout stock screener with proven strategies from pro traders.

We Found the "What," Now Let's Find the "When"

Alright, your penny stock screener did the heavy lifting. It sifted through thousands of tickers and handed you a clean, manageable list of stocks showing unusual strength and volume. That's the "what" to trade.

Now it's time to switch hats. You're no longer a data miner; you're a chart detective. Your new job is to figure out the "when"—and just as importantly, the "if."

This is where good old-fashioned technical analysis comes in. Don't worry, you don't need a math degree or a screen full of complicated indicators. For penny stocks, simple, visual patterns on a chart are often your most powerful allies. The screener flags the potential, but the chart is what confirms the timing.

Think of this as your final sanity check. It’s what stops you from blindly buying a stock that’s already rocketed up 200% and is just about to run out of fuel.

Does the Chart Tell the Same Story?

Once your breakout scan spits out a few promising names, the very first thing you should do is pull up their charts. The big question is: does the story the chart tells match the story from the screener?

If your screener flagged a stock for a 15% gain, you want to see a chart that reflects that strength—a big, decisive green price bar on the daily chart, ideally on a surge of volume.

Look for classic signs of strength that even a beginner can spot:

• Bull Flags: Did the stock make a sharp move up and is now pausing or pulling back slightly on lower volume? That's a classic bull flag, a consolidation pattern that often precedes another explosive move higher.
• Breaking Resistance: Look at the recent highs. Can you draw a horizontal line connecting them? A clean, powerful move above that line, especially with high volume, is one of the strongest buy signals in trading.
• Riding the Moving Averages: Is the price staying consistently above a key moving average, like the 20-day Simple Moving Average (SMA)? This is a great visual clue that the stock is in a healthy, sustained uptrend.

These visual cues are your confirmation. They tell you the momentum is real and not just some random one-day pop.

A huge mistake I see traders make is trusting the screener's output blindly. A stock might be up 50% on the day, but if the chart shows a candle with a massive wick sticking out the top, it's a warning sign. That means sellers came in hard and pushed the price back down. The momentum is already fading. Always, always validate with a chart.

Pairing Screener Filters with Chart Indicators

This is where you can build a really powerful, systematic approach. By pairing specific filters from your screener with corresponding technical indicators on your chart, you create a feedback loop that gives you a much more complete picture of a stock's health. It’s like getting a second opinion from the market itself on every single trade idea.

To really see how this works, think about how you can sync up the data from your scan with the visuals on the chart.

Screener Filter vs Chart Indicator

Putting it all together, let’s say your screener finds a stock that's up 20% this week and is trading at 3x its average volume. You pull up the chart. You see the price just blasted through a key resistance level, the RSI is a healthy 65, and the 20-day SMA is pointing skyward. Now that is a high-confidence setup.

This two-step process—screening for the "what" and analyzing the chart for the "when"—is what separates disciplined traders from gamblers. The penny stock screener finds the party, but it's the chart that tells you whether you're showing up fashionably early or walking in just as everyone is leaving.

Using Screeners to Dodge Pump and Dumps

Finding the next big winner in penny stocks is only half the battle. The other, arguably more important half, is learning how to sidestep the landmines. The most notorious trap is the classic "pump and dump" scheme, where scammers drive up a stock's price with hype, only to unload their shares on unsuspecting traders, leaving them holding the bag.

Your penny stock screener isn't just for offense; it's your single best line of defense against this kind of manipulation. You can build what I call an "anti-scam" filter to automatically weed out the sketchiest tickers before they even hit your radar. It’s all about setting rules that flag the textbook characteristics of a manipulated stock.

This really boils down to actively filtering for legitimacy. For example, a huge number of pump and dump schemes are born on less-than-reputable exchanges where the reporting rules are flimsy at best.

Building Your Defensive Filter

To protect your capital, you need to get proactive. Start by adding filters that specifically target the red flags most often tied to market manipulation. These settings will help ensure you're only looking at companies that meet a baseline of credibility and financial transparency.

A go-to tactic for manipulators is targeting stocks with an extremely low float—that’s the total number of shares actually available for public trading. A tiny float makes it incredibly easy for a small group to shove the price around with minimal buying pressure.

You can set up your penny stock screener to avoid these toxic environments from the start:

• Exchange: Tell your screener to exclude OTC Markets (especially Pink Sheets). Stick to the major leagues like NASDAQ or NYSE, which enforce much stricter financial reporting standards on their listed companies.
• Share Structure: Set a minimum float of 10 million shares. This simple filter makes it significantly harder for a few players to corner the market and control the price action.
• Recent Filings: If your screener has this option, filter for companies that have filed key financial reports (like a 10-K or 10-Q) in the last six months. Radio silence from a company is a massive red flag.

Spotting Low-Liquidity Risks

Low liquidity is another huge danger zone and a favorite playground for scammers. When a stock doesn't trade much, even a small burst of promotional buying can cause a massive price spike, creating a convincing illusion of real momentum. This isn't just anecdotal; it's a well-documented risk in speculative markets.

A core characteristic of penny stocks is their inherent risk and volatility, often linked to low liquidity. This makes them prime targets for manipulation schemes that prey on unsuspecting traders.

This perception of risk isn't just local; it's a global view. Research on investor behavior revealed that 82% of surveyed investors immediately associate penny stocks with low market capitalization. More importantly, the data confirmed a strong perception that these stocks are plagued by low liquidity, making them incredibly difficult to trade safely. You can read more about these investor perceptions and market risks.

By using your screener to demand a minimum daily trading volume and keeping your focus on the more regulated exchanges, you build a powerful buffer against the most common scams. Remember, having a defensive mindset is every bit as important as hunting for the next breakout.

Common Questions About Penny Stock Screeners

Once you’ve run a few scans with a penny stock screener, a new set of questions almost always pops up. It's one thing to build a scan; it's another to know what to do next and how to navigate the inevitable headaches of this volatile market.

Let's clear up some of the most common hurdles I see traders face. Having straight answers helps build the confidence you need to move from scanning to actually trading.

Are Paid Screeners Really Better Than Free Ones?

The short answer? Yep, almost always.

While free screeners are great for getting your feet wet, they come with some serious limitations. You're often looking at delayed data—15-20 minutes is common—which is a lifetime in penny stocks. They also tend to have fewer filtering options and spotty access to the OTC markets where a ton of penny stock action happens.

Paid tools, on the other hand, are built for serious traders. They typically offer:

• Real-time data: This isn't a luxury; it's a necessity for fast-moving penny stocks.
• A huge range of filters: You get way more technical and fundamental options, which lets you build incredibly specific and powerful scans.
• Advanced features: Things like backtesting, which lets you test your screening ideas on historical data to see if they would have worked.

Think of it like this: a free screener helps you find the ballpark, but a paid one helps you find your specific seat right behind home plate.

I’ve seen so many new traders try to save a few bucks by sticking with free tools, only to pay for it later in missed opportunities or bad trades based on stale information. Investing in a quality penny stock screener is an investment in your trading career.

What Should I Do After I Find a Promising Stock?

Finding a stock with your screener is just the starting whistle, not the finish line. The screener did its job by flagging a potential candidate, but now the real work—your due diligence—begins.

Your next steps should always involve a deeper dive. First thing's first: pull up the stock's chart. Does the technical setup we've been talking about actually look strong? Is the price action convincing or does it look choppy and uncertain?

Then, do a quick check for any recent news or SEC filings. Is there a real catalyst driving this move, like a new contract or surprisingly good earnings? This one step helps you separate a stock with a legitimate story from one that's just experiencing a random, unexplained spike—which can be a huge red flag for manipulation.

Building a disciplined routine for what you do after the scan is what separates consistent traders from gamblers.

Ready to stop sifting through junk and start finding high-potential stocks with precision? ChartsWatcher provides the real-time data and advanced filtering you need to build powerful, custom scans and gain a serious edge. Discover the difference with ChartsWatcher today.