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If I can get an average profit of 0.5% per trade, and there is a commision of 0.005 per share, can it ever be profitable to trade penny stocks(1$ to 6$)?

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    The way to make a small fortune in day trading is to start with a large one. – zeta-band Sep 13 '18 at 16:45
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Are you asking if you aim for a profit of 0.5% profit on each trade if you can be profitable? That means for every $1000 of capital you trade you only expect to make $5 in profits.

Even if you could achieve a 95% success rate, one or two losses would wipe you out.

Successful trades achieve their profitable results by letting their profits run and taking small losses early. Most successful traders only achieve around a 50% success rate, but have average profit size at least 2x to 3x their average loss size.

So no, I don't think you will be successful and profitable trying to make many small profits, nor by trying to trade penny stock (which by definition are less than $1).

  • If I'm buying and selling select stocks at the close of each day, and make an average profit of 1% and get a profit 70% of the days, we can almost double the initial amount in 70 trades. But the problem is, this 1% profit can be taken away by commisions and I'll be getting something like only 0.3% profit. Which is why I'm asking if it can ever be profitable – Rishi Swethan Sep 13 '18 at 11:55
  • @Victor - In the US, the SEC defines a penny stock as one which trades at less than $5 per share. – Bob Baerker Sep 13 '18 at 11:57
  • @BobBaerker - well we don't know if the OP is in the US, as in Australia penny stocks are worth just that - pennies not $$$. – Victor Sep 13 '18 at 12:23
  • @RishiSwethan - there is no way you will get a success rate of 70%, like I said the best traders aim to get around 50%. Also you will never make any profit by trying to aim for such small profits. – Victor Sep 13 '18 at 12:26
  • @Victor - Since we don't know where the OP is located, that's why I specifically noted that the location for penny stocks being under $5 was for the US, something that you failed to do in your Answer. – Bob Baerker Sep 13 '18 at 12:31
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Small correction: Your title asks about trading $1 to $3 stocks but the body talks about trading $1 to $6 stocks. It doesn't really matter mathematically since both upper limits are above the threshold for gain.

Given the percent gain and the commission fee that you provided, you must trade stocks that cost more than $2 in order to make a profit. Otherwise, it's a guaranteed loss, no matter how many shares you trade because the commission will exceed the profit. The one exception to this would be 100 shares at $2.01 which would yield no gain.

  • Thanks for the input, Do you know any brokers that provide commission lower than this with API support? – Rishi Swethan Sep 13 '18 at 12:12

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