the way to make money in thin stocks is to be a market maker and hire salesmen to get individual order flow pumping. That is pretty much the definition of a penny firm.
I have done it once and a while. you have to make huge winners in order to pay for the losers, as a losing trade is sometimes impossible to get out of. it is definitely easier to read the level 2 on these issues.
I specialize in relatively low volume stocks, preferring ones with volume over 250K. However, there are some that I trade that are below that cutoff point. I've trading these low volume "wonders" to be somewhat of an art. One example of an exception is AZZ that has very low volume but I've made money on it consistently. Extreme patience is needed, sometimes I had to wait an hour or more for fills. Most of my trades in it have been longs as getting short fills is very difficult. In general, I've found that some of these low volume stocks tend to test well (I use Tradestation) but trade poorly with big spreads and poor fills erasing the "theoretical profits". And, it is difficult to factor in a standard "slippage/commission" for them as it varies day by day, time of day and who knows what other factors. Doug S
Thinly traded Nasdaq stocks do move, but with the MM's all showing 100 shares these days for every level, you really have to size down or don't bother trading at all. I've seen JCOM and MSTR make some ridiculous moves. Or just trade NVR and play the spread like some idiot told me once
Would you prefer the MM's show 10k shares? What would that do for you? Low volume requires significant tape reading skills, a knowledge of the stock in question and how it trades, and a little bit of mind reading. Fast gains on the order of 5-10% can be made if you get the move right. Tough to trade huge size though.