Penny stocks are shares of small companies that trade at very low prices. The U.S. Securities and Exchange Commission defines a penny stock as one trading below $5 a share, though many people use the term only for stocks under $1. UpTicker screens for stocks under $5 because that is the range where small price moves turn into large percentage moves, and percentage moves are what momentum screens look for.
A low share price usually reflects a small company. Some are young businesses that have not yet earned much revenue, such as early-stage biotech or technology firms. Others are older companies whose value has fallen after a bad stretch. A few are simply companies that never grew large. The price alone does not say which kind a stock is, and that is the first lesson for any beginner: a cheap share price is not the same as a cheap company.
Several features of this corner of the market make prices jump around. Trading volume is often thin, meaning relatively few shares change hands each day. When volume is thin, a handful of large buy or sell orders can move the price a lot. Small companies also tend to have fewer analysts covering them, so news such as a clinical trial result, a contract announcement, or a financing deal can change how investors see the whole business within minutes.
A stock priced at $2 that rises by 20 cents has gained 10 percent. A stock priced at $200 would need a $20 move for the same result. Because small dollar changes show up as large percentages, low-priced stocks dominate lists of daily top gainers, and they dominate lists of daily top losers just as often.
Liquidity risk means you may not be able to sell quickly at a fair price, especially in a falling market. Information risk means that smaller companies sometimes disclose less than large ones, so it can be harder to check what you are buying. Dilution risk means that small companies often raise money by issuing new shares, which can reduce the value of the shares you already hold. Finally, some low-priced stocks are the target of promotional campaigns designed to lift the price so that insiders can sell. Regulators regularly warn investors about this pattern.
Treat a list of daily gainers as a starting point for research, never as a recommendation. Read the company's most recent filings on the SEC's EDGAR database. Check whether the move came with unusually high volume, which suggests real interest, or on almost no volume, which often fades. Look at what the company actually does and how it makes money. And decide in advance how much you could afford to lose, because with this kind of stock a total loss is a realistic outcome, not a remote one.
UpTicker shows which under-$5 stocks are moving most over the past 24 hours so that you can see the activity in one place. What you do with that information is a decision that depends on your own finances and goals, and it is worth talking to a licensed financial adviser before putting real money behind it.