Many people are unfamiliar with penny stocks which are stocks that cost five dollars or less. Penny stocks are traded independently rather than within the main market. Many inexperienced investors start out with penny stock trading due to the low investment cost but ultimately ask themselves, “what penny stock should I buy?”. Unfortunately many are unaware of how to trade these stocks. Here is how to trade penny stocks.
1. Contact a broker.
Although it is unlikely for a professional to take over your portfolio contact a broker to get advice on how to start trading penny stocks. Learning the basics is very important in order to increase your chances of success with penny stocks.
2. Be aware that penny stocks are high risk investments.
Although penny stocks cost five dollars or less, they are high risk investments. They have a higher chance of losing value over time but are equally likely to increase in value.
3. Locate your local OTC market.
Over the counter (OTC) markets are side exchange sites in which penny stocks are traded.
4. Familiarize yourself with the “bid and ask” price connection.
Penny stocks are sold by estimated values rather than a single unit price. The buyer will pay the asking price which is what the seller considers a fair price for the stock.
5. Decide if you need a broker.
If you are planning on purchasing penny stocks in sets of 100 it is a good idea to hire a broker. Sellers who sell stocks in sets of 100 are referred to as market makers who sell penny stocks in an auction like way.
Overall, trading penny stocks require some knowledge and experience but is a fairly simple thing to do. It is a great way to become familiar with buying and trading stocks and may result in making you money in the end.