Buying Penny Stocks Online
When you’re buying penny stocks online it’s not much different than when you buy stock that are valued much higher. A stock is considered a penny stock when it value is less than $5. Most of them are not traded on the Dow or the Nasdaq, although some may be listed on those exchanges, but typically you will find them on the OTCBB ( over the counter bulletin board.
Like I said there are many that are listed on the big board, most of them are alternative energy companies that are trying to hit it big. When you want to buy penny stocks online there are many places that you can go.
The one that I like the most is TD Ameritrade, a online broker that I’ve used for some time now. Their customer service is beyond great, which is to me the most important part of choosing a online broker. Since I’ve used them for so long and so much for my trades, I now pay only $7 a trade no matter how many share I decide to puchase.
Zecco is another company that is out there to use. They offer you 10 free trades per month with a $2500 minimum equity balance, after that it’s $4.50 per trade. their customer service is not as good as Ameritrade, but they do have a community board where you can talk to other traders for ideas (rule #1- there’s no such thing as a good stock tip).
Another company that I’ve not used is Scottrade. They charge $7 per trade, but they do have a lot of other fees that are listed on their site for other services that they provide. I never used them because of that reason. I feel that if you are there to provide a service of trading stocks, then that is where that only charge should be.
If you look on the internet for an online broker, you will find that there are many more, but do your research on these companies before using any of them.
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Buying Penny Stocks
“What is a penny stock?” This is a question that is asked every day. The answer depends on who you ask.
Typically a penny stock is a stock that is valued at less than $5.00, but others say that it’s less than $1.00. Buying penny stocks can be a profitable venture or a losing proposition.
Penny stocks are stocks of a new company that is trying to raise capitol for one reason or another. Since they are new and small, the information on these stocks are limited and may have restricted liquidity. Also a financial report could be hard to find on that particular company. The risks involved in trading them can vary. The stocks are not as active compared to others in the market which makes it hard to predict.
A penny stock can move up or down by 50% or better in a single day. This does make trading penny stocks quite attractive. To reduce your risks, you need to do research on each company that your looking to invest in. Do not trust someone else’ research, many brokers will inflate numbers to look more attractive than they really are and in doing so you can lose everything that you invested
Many people who are buying penny stocks are usually considered day traders. They’ll buy a stock one day and wait for the gains that they are looking for and sell the next day. They also tell everyone that they know that this is a great stock just so you will invest in the company causing the price to go up to where they will get out with their profits and leave you high and dry. Anyone that tells you that they have some great insider information on a company and that you should get in on the action, is someone that you shouldn’t be listening to in the first place. It’s illegal for anyone who has information that has not been revealed on a company to pass that info to someone else.
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Thinking Of Buying Penny Stocks
Thinking of buying penny stocks? Be careful of which ones you’ll want to invest in. A penny stock is a stock that is sold by a company that is either new or the company is trying to raise capitol for basic operation or expansion. They are referred to as penny stocks because the value is less than $5.00. Many different brokers offer penny stocks that are traded on the OTCBB (over-the-counter bulletin board). You can also subscribe to an on-line service. You know the ones, that tell you that they’ve invested in a company that the value grew 5000% in a short time.
The issue with buying penny stocks is that it is very risky. The statistics for investors who trade penny stocks and lost money is some where near 70%, so the odds are against you. You also need to be aware that there are some brokers who will inflate the stock by dishonest practices. You need to research the broker who offers these stocks just as much as you do in the stock itself. If they claim to having insider information, that is a sign that you need to walk away from that firm. The only way to find a good penny stock to invest in is to consult with a broker, but be careful they make money by make sales and may only have their own interest in mind. There is big money in trading penny stocks for these guys and to do that they need to sell you the stock.
Many investors have made a fortune in buying penny stocks, but for every great windfall stock that made millions, there are about nine that lost billions collectively. Look at Yahoo, they were trading at $0.78 a one time and now trade in the $20 range. Like I said though, that’s only one of thousands of companies that are traded every day.
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