It’s no longer like it was back in the days when you had to deal with a small brokerage firm to be able to trade penny stocks and accept whatever fee they were going to charge you. Even in the beginning of the online stock brokers, you weren’t able to trade but a few stocks valued under $1.00 and to trade sub-penny stocks (< $0.01) was out of the question. Today most of the popular online brokers like, TD Ameritrade, Scottrade, Zecco and E-Trade will take orders for penny stocks.

So the question is, which one? In my opinion, I prefer to use TD Ameritrade. They were recommended to me by a friend and I’m glad I did. I have also dealt with E-Trade as well, but the tools and the customer service I receive from TD Ameritrade surpasses E-trade, so now I only use them. Their fees per trade ($9.95) are more on the higher end than their competitors, but since I do so many trades per year, when I mentioned that I was thinking of going somewhere else, they lowered the fee for all of my accounts to just $7.00 per trade no matter how many shares I purchase.

Scotttrade is just as good as TD Ameritrade with their tools, but from a few traders I talk to say their customer service leaves something to be desired. Their transaction fee is less than TD Ameritrade at just $7.00 per trade. but for trading penny stocks they charge an extra fee. They refer to it as a Low Price Stock Fee. Scottrade will charge ½% for stocks under $1.

For those of you who have your own Stock market software, you might not need to use one of the mentioned websites. So in that case you need to look at Zecco. This online stock broker only charges $4.50 per trade, no matter the size. They also have the least amount (actually none) of fees. Zecco doesn’t have a minimum balance requirement either. Great for investors who are starting out with a small portfolio. Zecco also offers 10 free trades per month providing you do a certain amount of trades per month.

There are so many that I really can’t list them all here in this one post. Look for yourself and you will see more choices than you were really looking for. Everyone is different and so are their lives, so you are the only one that can make this decision for you. Most of these penny stock brokers applications will only take you ten minutes to fill out and transferring money is easy too.

But penny stocks have a different kind of potential, that most newbies in the stock trading industry seem to overlook. Firstly one considers the price per share in the stock market.Since penny stocks are exactly what its name indicates, the price per share ranges from a few cents to maybe a dollar or two.

So when we look at the price and the range with which these climb up and down in the Intra-Day Market ( Buy and sell the stock in the same day), you need to be aware that you can lose or gain a lot in one day.It’s fluctuations like these that keep many new investors from trading penny stocks.

Now if you look at the details of of a stock you can buy with $100. A Blue Chip company with $100 per share would give you one share at that price, but a penny stock with a $0.10 per share will give you = 10,000 share at that price. Blue chip stocks will rise and fall within a few pennies or a dollar, which counts for about a 1% change. If the $0.10 stock goes up a penny or two, you stand to gain 10-20%. so unlike blue chips stocks, penny stocks have much more room for growth. In a world of Emerging Markets it is these penny stocks that have the potential to grow faster than expected. Provided that you choose the right penny stock, you can make huge gains with them. Take into consideration, that since these companies are new and are trying to make it big, they could also go out of business and you stand to lose all of your investment.

As with other high-risk investment vehicle, penny stocks offer high leverage for the investors. A small amount of increase of the price of the stock can make a good amount of money for the investor. It is also very important for the investor to be willing to sit on the stock for a long period and view this investment as a long term gain.

Penny stocks are any stock that trades below $1 per share or sometimes below $5 per share. The shares generally fluctuate in value. Therefore, it is important the understand the movement of its price not only by using technical analysis but also by using fundamental understanding of the company’s assets, growth, and direction.

I would recommend that someone interested in investing in penny stocks would ask assistance from investment advisers. A good way to do it is to subscribe to investment newsletters offering investment advice. Be cautious though in choosing the newsletter that you would subscribe to. If you are on the lookout of a good investment newsletter here are some tips for you:

1. The company offers 24/7 customer service
2. The customer service representatives are friendly, courteous, and professional
3. The editors answers your inquiry either by mail, email, or fax (most editors won’t answer your questions via phone because they are constantly looking for good stocks to recommend)
4. they have good winners to losers ratio in their portfolio (6 winners out of 8 open positions is really hot)
5. And the company provides you access to the company’s model portfolio when you ask for it.

There are so many investment newsletters out there, but if you want excellence, you may want to consider the tips above.

Let’s start with the concept of someone giving you free advice on which stock to buy and when to buy it. What’s in it for them? That’s the first question that comes to mind when I think of these websites. If they send you free e-mails and don’t ask you for any money on return, then how do they make their money? To get one thing straight… getting a tip on a stock is not the way to play the stock market. You need to do your own research on the stock that you are looking to purchase. Don’t be what I refer to as being a penny stock chaser.

These websites are more designed to get others to buy into stocks that they’ve already set up a position in and are waiting for the “new” investors to jump on the band-wagon and cause the price to go up. When that happens, they will scale out of their position and leave those who are not as quick to get out before the price drops back to where it was.

In my research of these websites, I signed up for their e-mails and track how the stock moved. In many of these cases ( over 85%), I would never own or invest into any of these stocks. Their balance sheet and the financial reports of these companies did not look good. As a matter of fact, one company in particular WDAS.PK, was being hyped by three different websites. What did the stock do from the e-mails? What happened was unbelievable. The first alert was on Sunday Oct. 11th. Telling their subscribers to buy at $0.05, but when the stock opened on Monday it was at $.40. Updated alerts went on stating that the climb wasn’t over and to buy at $0.40 – $1.20 per share. I will say that those who timed it well, made a ton of money if they sold their shares around $1.85 – $2.00. It hit a high of $2.00 before closing at $1.85. In just two trading days it closed at $0.48.

During the entire 10 trading days from when they first talked about WDAS.PK, the stock went up and back down again to where the ride started at. As of this past Friday, Nov. 20th, it closed at $.20 per share. Was it good to “play” this stock tip? Only if you were able to watch the day to day activity of the stock, was it worth it. The stock came down a lot quicker than it went up. I’m sure many didn’t get out in time and suffer a loss.

My advice to you is to do your own research and not to take anyone’s advice at face value. Just because someone or some website says it good, doesn’t make it so. I know it may be harder to do research on companies that trade on the pink sheets because usually these companies don’t have analyst watching them. Some information is out there, but you have to watch for fluff articles that publicist put out to help boast interest in the company.

In order to fund these activities, they sell shares in their companies for attractively low prices in the hopes that they indeed find marketable quantities of the resource in question. In the event that they do indeed find what they are looking for, the value of the company increases by many factors resulting in amazing returns for investors. These stocks are incredible volatile for three main reasons: the first is that they are already trading in ‘pennies’ so a one penny increment can represent an enormous percentage difference in price.

Secondly, as investors await word from geophysical tests and explorations, the price is incredibly vulnerable to rumours of all kinds that one or another investor may feel is or is not applicable to the success or failure of that particular company.

The third reason that these stocks are so volatile is that they are often traded at incredibly small volumes leading them to be incredibly susceptible to buy or sell requests from speculators.

Unfortunately, these stocks are also vehicles for dishonesty and insider trading. In the case of BRE-X, for example, the stocks price increased by many multiples on news that resources were found that would result in unprecedented profits. Such news gave an incredible injection of positive will towards the company and many people invested their entire life’s savings, only to find that these results were fraudulent and that the company did not in fact have any basis for their reports, but making millions of dollars for those responsible in the meantime as they allowed their stocks to increase in value, and selling before the collapse was exposed. Caution should always be practiced when buying and selling penny stocks.

There’s a common perception that they are very risky, and there is some truth to this. The risk is not caused by the low price of the penny stocks. Many foreign exchanges typically price even their blue-chips in share prices which are less than a dollar. And because penny shares are not marginable in North American brokerage accounts – which means your broker won’t lend money against their value – they are actually less risky than stocks that trade for higher prices, as the most you can lose with pennies is your initial investment.

But there are some ways in which penny stocks are riskier than stocks that trade for higher prices if you’re not good at understanding the stock market. They tend to be smaller companies, and thus their management is not typically comparable in quality to that larger companies where the remuneration paid to executives can be much higher. Their smaller capitalizations make them more subject to insider manipulation. And they tend to be involved in riskier enterprises such as mining exploration.

In addition to the added risk, there are some other difficulties in trading penny stocks which you should consider. Institutional investors – such as mutual funds and pension funds – avoid them because they are too illiquid to buy in large quantities. This creates a problem for the retail investor as well. If you accumulate a large position in a penny stock you may find it very difficult to reduce your position. There simply may not be enough buyers who wish to buy your stock on any given day. In fact, some penny stocks are so illiquid that they do not trade every day. This illiquidity leads to another problem in trading them: the large bid-ask spreads. The bid-ask spread is the difference between the bid price and the asking price of a share.

In penny stocks it can sometimes be very large, with the difference representing a large percentage of the share’s value. With penny stocks it’s important not to put in market orders unless you’re confident that the spread is small, and that there is sufficient volume trading to fill your order. Otherwise, make it a practice only to use limit orders, and be patient. Volatility is another problem with penny stocks. For this reason you should generally avoid using stop-losses, particularly with very thinly traded issues, as you can easily be stopped out of a position simply by routine trading swings.

Penny stocks are risky, but they can also be rewarding. Returns of 100 percent, 500 percent, or even 1000 percent or more do happen. And since you can only lose a maximum of 100 percent on any single trade, you don’t need to pick a winner every time in order to make a significant return on your investment. Just be sure to limit the portion of your portfolio invested in penny stocks, and then pick a basket of them, rather than putting all of your money into a single name or two. Trading penny stocks can increase your investment returns, provided you trade them with caution, and are fully aware

However, if any of these companies hit it big, their shares go up a ton and that makes the original investors big dollars. The term return of investment is a word tossed around used to show how much you get on your investment. The best performing stocks in the past decade have been penny stocks. Penny stocks start low and when they get to be a few dollars per share, that is huge profits since the percentages are so high (some into the thousands time the starting price).

Cheap stocks provide for large potentials but large losses since there is a ton of risk. Anyone can invest in a safe company like a Microsoft or Google by buy stocks online, but those are expensive and barely go up, but are steady. Penny stocks are one of the easiest ways to lose money. Everybody is looking for the best penny stock investment hoping to make money. You run into a ton of pump and dump techniques, where someone boasts about a stock, waits for an increase in price, and then sells all of theirs. Penny stocks are actually not that liquid and are very tough to gauge.

The prices of the stocks are almost actually never affected by what the company does, but what the market does. There are some penny stocks that can do well, but extreme research is needed. One must look at the financials of a given company to really see if the company has profit potential. One of the biggest things to look for is liquidity and assets, meaning having lots of cash, with almost no debts. Finding this is just about as rare as finding a penny stock that hits it big. Anyone can invest in penny stocks, but the risk is so great, it really is not even worth it. You may even have a better shot winning the lotto.

When you come right down to it, there’s a law of averages that you need to think about when making a penny stock investment.

Just recently I bought Sirius/XM Satellite radio (NASDAQ: SIRI), for $0.05 per share and took it up to $.50 per share in just one month. That is a a gain of 900%. Those types of percentage gains can only be done with penny stocks. The reason I said that I haven’t made as much money with these type of stocks is because a year earlier I bought into a stock at $2.94 (cost average) and watch it drop down to below $2.00 in no time at all. I had more of a stake in that company than I did with the more recent one.

I’ve said it before and I’ll say it again, you need to look hard at any company that are thinking of investing or trading in. Look at their balance sheet, their debt-to-earnings ratio, listen in on the conference calls when and if they’re available. If you don’t and end up losing a big chunk of your investments, you have no one else to blame.

They are plenty of people out there that say that they can “show” you the way to picking penny stocks, but the truth of the matter is that you pick penny stocks the same way you pick any publicly traded stock, you do your research into the company first. If you can’t do that, then you shouldn’t be buying stocks in the first place.

I’ve been watching Sirius for quite some time and the reason I got into the company was because I knew that the company would find the financing that they needed. I also know that this company isn’t going anywhere anytime soon.

If you really think about it for a minute, why is someone that you never met and most likely never will, want to give you a list of penny stocks that he recommends for no charge? What a great guy that he would want to help total strangers make money in the stock market and do it at no cost to you.

Because in a sales pitch like stock trading you have to give away something to get the person to see if you know what you’re talking about. Trading in penny stocks is big money for brokers and the houses they work for.Why is it that penny stocks seem to be a big thing within the stock market? Well actually they’re not as big as you may think in regards to owning the shares. The smart money ( the pros of Wall Street) don’t buy and sell penny stocks, there’s too much risk involved. Instead if they want to get into a company that has it’s shares at penny stock levels, they’ll actually loan them the money with interest.

They may seem like a big thing to you and others that you may speak with, but not when it comes to the smart money on Wall Street. It’s the amateur trader and the day trader that wants to trade in penny stocks on a regular basis. The reason for that is that they have the reputation of having big percentage gains (or losses) in any given day. You can make (or lose) a load boat load of money real quick.

If you’re looking to get a list of penny stocks and plan on buying and selling them, be careful, it can cost a lot more than just a few pennies.

In the auto industry we now see General Motors (NYSE:GM) and Ford (NYSE:F) trading in the $3 range. GM hasn’t seen these levels since 1943. In January 1999 they were trading at $87 per share and in the beginning of this year (2008) they were at $19. Now eleven months later they are on the verge of bankruptcy and trading at just $3 per share.

Ford is in the simular situation, they were at their all time high of $37 per share in March 1998 and are now trading at less than $2 per share.

Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) the two government sponsored mortgage brokers have also lost 98% of their valus since the beginning of this year.

American International Group (NYSE:AIG) were just saved by the government after losing 97% of their value.

For all intent and purpose, these stocks can now be classified as penny stocks. Many traders, especially the newbies and amateurs trade penny stocks for a couple of reasons. One, the price per share is cheap and two, penny stocks typically have the tendency to jump big when refer to as percentage gainers.

Do you really want to start trading these companies that I’ve listed? The answer should be no, but I’m sure quite a few of you guys and gals out there are already do so. I will tell you that these companies as well as their stocks are broken. They are all leading companies that help build this country, but because of bad business practices are now in big trouble of going away for good.

So if you want to trade these penny stocks, go right ahead, but don’t say I didn’t warn you.