How do you buy penny stocks?
-For an ordinary person to buy penny stocks, they must have a 'broker'. A broker can be thought of as the middleman between you and the market. You tell the broker you want X amount of shares of a company, and it is the broker's job to fulfill the order. One can use a 'full service' broker to assist them with their trades, or a 'discount' broker such as TD Ameritrade, for example. A discount broker lets you enter your own trades through an online interface. This saves a lot of money on 'commissions' (the price you pay for each fulfilled order). A discount broker is recommended for buying penny stocks.
What stock broker should I use?
Check out our Comparison of Penny Stock Brokers.
-To buy penny stocks, a discount broker such as E*TRADE, TD Ameritrade, Fidelity etc. is your best bet. Each broker has it's pros and cons. Overall, our opinion is that TD Ameritrade and ETrade are the best discount brokers for trading penny stocks. Another broker to consider as a primary, or secondary service is Fidelity. Fidelity is a bit of a lower priced option with trades at $7.95, albeit with less bells and whistles, such as Level 2 quotes for penny stocks... Factors you should consider when choosing a broker include:
- Commissions: How much they charge per trade (read the fine print)
- Additional fees for trading large share orders or low priced stocks
- Minimum funding to open an account
- Inactivity and Maintenance fees
- Features and Tools (e.g. Level 2 Quotes for penny stocks)
Some brokers may have lower basic commissions, but make up the difference with additional fees for trading low-price stocks, or by not including premium features at lower levels of trading activity. Be sure to evaluate all aspects of the broker before signing up. As a great start in your selection of a penny stock broker, please click the link below to go to our broker comparison page.
How much money do I need to buy penny stocks?
-The amount needed to start is a highly debatable subject. The more money you have to put into a stock, the less the stock will need to increase in price before you have covered the costs of commissions and realized a profit. On the other hand, more money in a stock means you have more money at risk. When you are ready to start trading, however, we recommend having at least $500 for each penny stock you wish to buy.
Depending on your trading strategy, and the liquidity of the penny stocks you're buying, you may wish to have substantially more money to make your trades. For example, if a penny stock has high liquidity you may wish to purchase a large position, (worth $1000, $5000, or even $10,000) and go for a short term "scalp" by selling the position for a small percentage gain. Instead of playing with $500 and going for a 100% gain, you could play with $5000 and go for just a 10% gain. The profit in these two cases is the same.
How many different penny stocks should I buy?
-To start, we recommend trading no more than 3 penny stocks at one time. You need to be able to concentrate and do homework on the stocks you own as well as stocks you are looking to buy next. If you have too many, your ability to do this will be limited, and chance of success will be reduced. Once you learn the ropes and have a substantial portfolio, you might consider having more "irons in the fire". Some traders will buy penny stocks that are cheap and dormant, and hold small positions in hopes that at some point at least one of the stocks will come "into play". Being in at rock bottom prices, available when nobody else is buying, almost guarantees nice profits should the stock run.
How do I actually purchase penny stocks?
-To buy or purchase a penny stock, or to sell it for that matter, you must enter an order with your broker. To explain this subject in detail, please see our article on buying penny stocks.
What are some good penny stocks to buy?
-To find some penny stocks to buy, you can follow the steps outlined ahead on our hottest penny stocks page. We suggest, however, to continue through the site using the "next page" link below to learn more about penny stocks; what makes them attractive, why they can rocket up in price, and some of the good and bad things that penny stock companies can do that affect shareholders.
We also suggest you check out our article on 'Penny Stocks to Buy' for some helpful information on what to look for, and what to avoid, when finding penny stocks to put money into.
-Now that you have an understanding of what you need to start trading and how to buy penny stocks, let's discover what exactly a "penny stock" is and why you can make big money trading them!