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A Beginner’s Guide to Trading Penny Stocks

Not everyone is born with the knowledge to become a successful penny stock trader. However, you can make a lot of money if wish to put your precious time to hone your skills and increase your knowledge about penny stocks. Being a beginner, you need to learn many things so you will not go in financial loss.

A Beginner’s Guide to Trading Penny Stocks

What is penny stock?

Penny stocks are those which trade at a very low cost. They hold very low market capitalization listed on a smaller exchange. Those who wish to get into this market can go with penny stock as they do not have to invest a lot and will remain stress-free. They come up with high-risk factor due to lack of liquidity. Moreover, it has a smaller number of shareholders and limited disclosure of information.

Best broker for low fees

The top penny stocks keep changing and updated each trading day after the closing of the stock market. Please note trading penny stocks are risky, and you must do invest your money carefully. The best broker to trade penny stocks are as follows:

  • Interactive Brokers
  • Merrill Edge
  • TradeKing
  • Scottrade
  • TD Ameritrade
  • OptionsXpress
  • Lightspeed
  • Robinhood

Top 4 rules for trading penny stocks

If you are a beginner, then you must go through these top four rules for trading penny stocks which you need to follow:

  • Do not go for trading with the money if you can’t afford to lose. We all know that trading penny stocks are risky especially if you are going to kick off as a market beginner. There are chances that you may lose all that you put in. Getting into this field means you need to have patience.
  • Are you going to invest more money in stocks? Wait for a while and calculate your stop loss before entering a trade. It sounds a bit stupid trading penny stocks without a stop loss.
  • Being a beginner, you should always keep one thing in mind that always use a limit order to buy and sell stocks. Do not go with the market order. Chances are high that you may get a big difference for the price you get on the screen and the price you are going to have.
  • Since you do not wish to expose your money to risk, you should back off if a trade is not going your way.

What to look for in a penny stockbroker?

Go for a broker that allows you to kick off with a lower balance. E-trade and TD Ameritrade are quite popular among those who wish to put their money in since these institutions give you the opportunity to trade with a lower balance. The following are some of the best in the business:

Ally. Invest

This is one the most sought-after platform among the following categories:

  • Active traders
  • Beginners looking to kick off trading
  • Low fees
  • Penny stocks

TD Ameritrade

This is high in demand since it is considered best for

  • Investors looking for portfolio-building advice
  • Beginner investors
  • Advanced traders

Robinhood

This is one of the best options for low fees. This is best for

  • Low-cost stock trading
  • Beginners wish to get into the trading
  • Investors on the go

The next thing to bear in mind is that you should choose a broker who is reliable and has excellent research reports. Penny stocks related reports are not published through any media form and that is why there are chances to get caught in fraudulent marketing schemes. This is why it is needed to go with the reliable broker.

Have you ever contemplated that why you are getting a small return even you are trading a large number of stocks? It may be happening due to hidden fees. If you are going to have a volume of discounts from a particular brokerage, then you may go with that brokerage. Ally Invest is one such name that keeps offering a large volume of trades to those who plan on having a large volume of trades.

Top 4 technology penny stocks

If you are going to or have already put money in stocks, you need to keep a close eye on the records. The investors have to keep making some guesses regarding the future. Having a strong enough track record helps to indicate if the investor is going to survive or not. You can check out these top 4 technology penny stocks:

  • Zix Corporation (ZIXI)
  • Glu Mobile Inc. (GLUU)
  • Arotech Corporation (ARTX)
  • Plug Power Inc. (PLUG)

Hot penny stock picks are considered as those stocks which keep trading in between .001 of a penny to $5.00. They are extremely risky and can also make the investors to get showered with the remarkable rewards. This is required to prepare a list of penny stocks very carefully before putting money in. The popular penny stock picks come up with an element of risk. If you are a novice, and as advised by professional investors, do enough research before investing.

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