For aspiring investors or budget-conscious traders, $1 stocks (often classified as penny stocks) offer the allure of affordability and massive upside potential. After all, owning 1,000 shares of a promising stock at $0.75 feels a lot more thrilling than owning a single share of Apple. But don’t let the low price fool you – these stocks are packed with high-stakes risks and hidden complexities.
While bargain hunters dream of catching the next breakout, the reality is that trading $1 stocks demands sharp awareness of liquidity and risk – two elements that can make or break your strategy in this volatile segment.
Why $1 Stocks Appeal to Traders
There’s something psychologically powerful about owning thousands of shares of a stock. That sense of scale, combined with the potential for quick price swings, makes $1 stocks a popular choice for short-term and momentum traders.
The volatility itself is what draws many in. A 20-cent move in a $0.80 stock is a 25% gain – numbers that are far harder to achieve with blue chips. But volatility cuts both ways.
In fact, according to FINRA, penny stocks account for about 20% of all daily equity trades in the U.S., underscoring the immense speculative interest surrounding this segment. While this creates opportunities, it also invites manipulation, liquidity traps, and rapid losses for the unprepared.
Top $1 Stocks to Watch (as of August 2025)
While every $1 stock carries some risk, a few names stand out due to consistent volume, credible leadership, or compelling business pivots. Traders looking for the best stocks for $1 can start by researching companies with proven liquidity and real business direction. Here are three candidates worth watching:
1. Progenity Inc. (PROG)
- Sector: Biotech
- Price: ~$0.96
- Why it stands out: Recent restructuring and licensing revenue give this micro-cap biotech stock some breathing room. It also enjoys steady volume, helping avoid some of the liquidity traps that plague the sector.
2. Zomedica Corp. (ZOM)
- Sector: Veterinary Health
- Price: ~$0.89
- Highlight: Strong entry into diagnostic devices for pets, an industry experiencing tailwinds. Traders are watching its product rollout for upside potential.
3. Kosmos Energy (KOS)
- Sector: Oil & Gas
- Price: ~$0.99 (dips occasionally below $1)
- Why it’s unique: While not a traditional penny stock, Kosmos often flirts with the $1 line and is backed by credible offshore drilling operations.
The key here isn’t just the price – it’s also about volume and fundamentals. For instance, ZOM regularly trades over 7 million shares per day, helping mitigate the common liquidity concerns associated with penny stocks.
What Exactly Is Liquidity – and Why It Matters
Liquidity is one of the most critical factors in penny stock trading. It refers to how easily you can buy or sell a stock without moving the price too drastically. Many new traders overlook this, but a stock with low liquidity can turn into a financial trap.
Let’s say you buy 5,000 shares of a $0.70 stock. If the daily trading volume is low, there might not be enough buyers when you decide to sell – forcing you to accept a much lower price. Worse, wide bid-ask spreads mean you’re losing money even before the trade moves.
According to a CFA Institute study, stocks with daily trading volume under 100,000 shares are 45% more likely to have bid-ask spreads exceeding 5%. That difference adds up quickly, especially for active traders.
High liquidity, on the other hand, gives you flexibility, tighter spreads, and smoother execution – crucial for avoiding costly slippage.
Understand the Risk: Why Are These Stocks So Cheap?
Let’s get real – stocks trading under $1 aren’t bargains just because they’re low in price. Often, they’re cheap for a reason. They could be companies facing delisting, lawsuits, management issues, or persistent unprofitability. Others may be in pre-revenue stages with little more than a pitch deck.
And yes, manipulation is common. “Pump-and-dump” schemes – where hype artificially inflates a stock before it crashes – are notorious in this space.
The SEC reported in 2023 that over 65% of companies trading below $1 for more than a year were either delisted or forced to reverse-split to meet exchange requirements. That stat alone should temper your expectations.
A $1 stock doesn’t need to go to $100 to make money – but it does need to survive, and ideally, thrive.
The Smart Way to Vet a $1 Stock
Before placing a trade, you’ll want to investigate a few key aspects:
1. Company Fundamentals
Even cheap stocks should have a discernible business model. Check recent earnings (if any), look for revenue trends, and examine whether the company is burning cash or making progress.
2. Debt Load
If the debt-to-equity ratio is above 2.0, it’s worth a red flag. Debt-heavy microcaps often issue new shares to raise funds – leading to dilution, which drags prices lower.
3. Insider Activity
Are executives buying or dumping stock? According to a University of Michigan analysis, companies with net insider buying outperform peers by 4.5% annually. Follow the money.
4. Trading Volume
Sustained volume means interest and easier exits. Avoid any stock that spikes in volume for a day and fades right after – it’s often a classic setup for manipulation.
Striking the Right Liquidity–Volatility Balance
Liquidity and volatility are two sides of the same coin. High liquidity makes trades smoother – but in some low-float stocks, too much interest invites manipulation from institutional players or trading groups.
The key indicator? The volume-to-float ratio. A higher ratio signals greater trading interest and momentum potential. Stocks with a float under 20 million and a daily volume exceeding that float are often volatile.
In fact, FINRA data from 2023 revealed that such stocks experience average intraday swings of 6% or more, significantly higher than larger-cap names.
What does this mean for traders? You want enough liquidity to enter and exit safely, but not so much froth that the stock becomes a battleground for pumpers and dumpers.
Practical Risk Management Tips
Here’s how smart traders protect themselves in the wild west of $1 stocks:
- Position sizing: Limit exposure. Don’t throw your whole account into one ticker.
- Set stop losses: A 10% hit on a tiny position is survivable. A 50% hit on a huge one isn’t.
- Avoid holding overnight (unless part of a long-term thesis): News or offerings can crater a stock after hours.
- Stick with limit orders: Never trust a market order in a thinly traded stock – you could get filled far below expectations.
Traders who follow structured exits and clear position rules tend to fare better. A 2024 study from TradeStation Analytics showed that traders using firm stop-loss strategies on penny stocks beat their peers by an average of 3.2% per quarter – not a small edge in this arena.
Final Thoughts: Are $1 Stocks Worth It?
There’s no doubt about it – trading $1 stocks can be thrilling and, when done right, profitable. But you must treat it with the same seriousness you would trading larger names. Research, discipline, and an obsession with risk management are non-negotiable.
To recap:
- Liquidity matters more than you think. Don’t get stuck.
- Risk is baked in, but not always visible at first glance.
- Fundamentals still matter, even for speculative trades.
- And position management is what keeps you in the game long enough to see the upside.
In the $1 world, it’s not about getting rich overnight – it’s about protecting your capital so you can trade again tomorrow.