An AI-powered momentum scanner that finds penny stock setups before the crowd, validates them with Claude, and manages risk with volatility-based stops.
Most trading bots rely on lagging indicators like MACD and RSI to generate signals. The problem? By the time a MACD crossover confirms on a penny stock, the move is already over.
Our approach is different. We focus on context over indicators. Instead of reacting to what already happened, we look for situations where momentum is likely to begin: stocks gapping up on real catalysts with unusual volume and institutional-level price reference points.
The three pillars of the strategy are VWAP (where institutions are buying), RVOL (whether the volume is real), and ATR (how much risk each trade actually carries).
Phase 1
Premarket Scan
4:00 - 6:30 AM PT
Find stocks gapping up on unusual volume. AI assesses the catalyst quality.
Phase 2
Market Execution
6:30 AM - 11:00 AM PT
Watch watchlist for VWAP setups. AI validates each signal before execution.
Phase 3
Review & Adapt
Market Close
AI reviews the day's performance and adjusts strategy parameters for tomorrow.
We look for three specific setups. Each requires volume confirmation (RVOL) and a healthy relationship with VWAP. No setup, no trade.
The bread and butter. A stock gaps up significantly premarket on a real catalyst, and we buy the first pullback to VWAP.
Price was trending above VWAP, pulls back to test it, and bounces with volume. Confirms buyers are defending the level.
A sudden explosion in volume with price breaking the intraday high. High conviction when all conditions align.
Risk management is where most bots fail. A fixed percentage stop on a volatile penny stock either gets triggered by noise or sits too far away to protect you. We use volatility-based risk instead.
ATR-Based Stops
Stop distance is based on the stock's actual volatility (Average True Range), not a fixed percentage. Volatile stocks get wider stops; calm stocks get tighter ones.
VWAP as the Line in the Sand
If price closes below VWAP, the thesis is broken. We exit immediately regardless of what other indicators say.
Scale-Out Profit Taking
We sell half the position at the first profit target (1x ATR) and trail the rest. This locks in gains while letting winners run.
Time Stop
If a position hasn't moved after ~2.5 hours, we close it. Penny stocks that don't move early rarely move later. No new entries after 11:00 AM PT.
Claude is integrated at every decision point, not as the decision-maker, but as a second opinion that catches what rules can't.
Catalyst Analysis
Assesses why a stock is moving premarket. Filters out pumps, PR noise, and dilution offerings. Only strong and moderate catalysts make the watchlist.
Signal Validation
Reviews each signal before execution. Considers false breakout risk, volume sustainability, and current portfolio exposure.
Trade Reasoning
After every trade, generates a plain-English explanation of why the bot acted, included in real-time email alerts.
Daily Learning
Reviews each trading day's results and adjusts strategy parameters. The bot gets more selective or aggressive based on what's working.
This bot runs on Alpaca's paper trading environment. No real money is at risk. Past performance of the strategy does not guarantee future results. This is not financial advice.