Established as a platform for new companies to have a great start, the sad reality is that many of the approximately 3,500 small companies listed in the OTCBB, or Over-The-Counter Bulletin Board, will never reach the big boards. This is because most of the firms run out of money or just disappear even before their merchandises, products, or services become lucrative. The good news is that there is lots of money that can be easily made by trading penny stocks.
Buying Penny Stocks
If you plan to trade in penny stocks, you must pay attention to the penny stock brokers commissions and transactions fees since they will eat away at your returns. You must first open an account with a stock broker before you can start trading penny stocks. The easiest and cheapest way is to open your account with an online broker.
To help you get started trading penny stocks, here is our list of the Top 3 recommended penny stock brokers:
Our #1 Pick:
For over 25 years, Scottrade has been the leader in the stock brokerage industry – and it’s for a reason. Scottrade provides a wide range of investment products to meet your investment needs and financial goals. They keep their customers happy by avoiding unnecessary fees for things like IRAs, large orders, after-hours trading, account maintenance or inactivity.
Scottrade is an excellent choice for beginner penny stock traders, those who invest in mutual funds, and long-term (buy and hold) investors (mainly because of no account inactivity charges). Because Scottrade is a stable, seasoned brokerage firm with a good reputation, it is the natural choice for people who don’t trust their money with newer companies but also don’t want to pay $10+ for trades with other established brokers.
- Commission per stock/ETF trade: $7
- $500 to open account
- 400+ local branches
- Great support for beginner investors
- Open your Scottrade account now!
Best Customer Service:
TradeKing is an online broker providing low flat trading fees with no minimum account requirements and no hidden fees, making them one of our top providers for trading stocks online. TradeKing online brokerage accounts offer easy-to-use investment tools with low flat trading fees and no minimum account requirements. They have received the maximum 5-star rating for their customer service in SmartMoney’s 2011 broker survey, making them a solid choice for people who require assistance opening and maintaining their brokerage account.
- Commission per stock/ETF trade: $4.95
- Low commissions
- No minimums or hidden fees
- Great investor community to watch and interact
Best Discount Broker:
OptionsHouse is an online stock and options broker that provides a professional trading platform with a flat-rate commission structure for low-priced stock and options trades. With only $3.95 for a stock purchase/sale, it’s one of the cheapest brokerages if you plan to invest in penny stocks.
- Commission per stock/ETF trade: $3.95
- Lowest flat-rate commissions
- No account minimums (minimum opening deposit is $1,000 for a cash account and $2,000 for a margin account)
- No surcharges for large orders, penny stocks and extended hours trading
- Open your OptionHouse account today!
By using one of the penny stock brokers above, traders like you can discover where to buy penny stocks that have the highest potential of survival and go live stream on the big boards. Read on as this article uncovers some of the best penny stocks and find out how you can acquire them.
Which Penny Stocks to Buy?
Need help to find penny stocks to buy? Isn’t that the question that every trader is asking? Luckily, there are numerous subscription-based and free stock screeners today that can assist you in finding some of the best penny stocks to buy. These tools help you determine the most profitable stocks available. The challenge comes in getting the most efficient screener that performs excellent task of combining fundamental as well as technical analysis.
One of the top stock analysis and screener services today is Morningstar. They are a great resource to help assist you in your investment decisions and their stock ratings system is universally known throughout the investment community.
You may need to employ more than one screener. If that is the case, the most effective step to take is to use a technical screener first and then look for fundamental screener. These trading tools will assist you in finding credible information on several penny stocks and help you steer clear of stocks that lack liquidity due to the bigger market players.
Putting Probability to Action
Understanding where to buy penny stock is just half of the trading battle. The other half is procuring the right tools to assist you in scanning hundreds and thousands of stocks.
The following is the basic list of guidelines of how to buy penny stocks that you can utilize as a starting point when venturing in the world of more than 3,000 OTCBB penny stocks:
- For the reason that many traders look for stocks that come with huge room to run, it would be beneficial to confine your search to stocks priced between $0.05 and $2 as the maximum. Keep in mind that the higher the stock prices are, the fewer the candidates.
- Liquidity will permit you to quickly and easily enter and exit a trade, thus buy penny stocks that trade average daily volume of 100,000 shares as the minimum.
- Choose stocks that are presently moving higher, always go for those with an affirmative three and ten week stock price delta, wherein the 9-day SMA or Simple Moving Average is larger than the 18-day SMA. This data puts forward an uptrend.
- Basically, you will need stocks that are not bleeding cash. Therefore, stay away from companies that reflect negative EPS or earnings per share.
- To make certain that you don’t fall under the trap of stocks that show single good day also known as swing, it is advantageous to carry out your search for an extended period, like a five-day search period. Penny stocks that show up often over the five-day search should be included in your short list.
- Lastly, every stock that made it to your short list should pass your tests. To start, each should present a healthy chart pattern. The stock should be in an uptrend and above support levels. In addition, always check and read news concerning stocks.
Penny Stock Trading System
Discovering where to buy penny stocks online is without doubt a more risky venture than investing in large and mid cap stocks, but by using a system to determine the best candidates you can significantly increase the odds of winning the trading game. It’s vital to research thoroughly before you buy into penny stocks. Learn about the company and understand their business operation as well as management. Keep an eye on the prices of your penny stocks many times daily. Additionally, you should place your guard up when you receive penny stock recommendations from individuals on the internet or through email messages. Penny stocks are known to be easily manipulated. Before buying any penny stock, it’s wise to first check to see if it is, or has been, promoted by stock spam.
Another very important point to remember is that no matter how efficient a system for finding stocks is, it’s crucial to utilize a stop loss. A five percent break of a huge trend or rounding bottom pattern is an excellent exit point. You can use a sell stop order to limit your losses on a falling stock and to protect a profit on a stock that you own.
Buying Penny Stocks
Here’s a summary of how to invest in penny stocks:
- Learn as much information as you can about penny stocks. Although there are many instances of people generating good money fast, more frequently, novice penny stock investors experience financial loss.
- Contact a penny stock broker. Thoroughly research a brokerage company that dedicates its services to penny stocks.
- Join online subscription services to discern where to buy penny stocks online. These sources can provide you an updated list of available penny stocks.
- Discover companies that offer penny stocks and only invest in those that are known for their reputable and potentially profitable products.
- Open your account at Scottrade now and get started trading today!