A Guide to Online Penny Stock Trading
Without leverage, how many people can afford a stock trading at $250,000? Not many. Even those who can afford the stock, how many shares can they buy? That is the current share price of Class A shares of Berkshire Hathaway. To many traders, buying the stock does not make sense. The same is true for companies like Amazon, Alphabet, and Priceline whose shares trade for hundreds of dollars. The solution to these traders is to trade companies with cheap share price. In this case, cheap does not refer to the company’s valuation but it’s share price in
dollar terms. Penny stocks are becoming very popular with many people trading them because of the profit potential. For instance, if you have $1000 and you buy 1000 shares of company A whose share price is $1. If the stock moves to $1.5, you will have made a 50% return. Who hates that? How then do you do online penny stock trading?
Penny stocks for dummies
If you have followed the financial market for a while, chances are that you have seen people who have made a fortune in the penny stocks. There are also dedicated programs in TV channels like CNBC that focus on online penny stock trading. Stories have been written about companies that have climbed from $0.5 per share to $10 and made people thousands and millions of dollars. According to Securities and Exchange Commission (SEC), penny stocks are the stocks that trade for less than $5. The benefit of buying these stocks is that they present you with an opportunity for making a huge profit.
Find an online stock broker
To trade penny stocks, the first thing you need to do is to find an online broker. Fortunately, there are very many brokers for you to choose from. The idea is to select a broker who charges you little commission per transaction. You don’t want to spend a lot of money paying commissions when trading. You also want a broker with a good reputation. Reputation building takes a lot of time and companies that don’t meet these requirements should not be considered. You also want a broker who has a great platform for you to trade with. The platform should have excellent add-ons like technical indicators and economic calendar.
NASDAQ Penny Stocks
As stated above, SEC defines penny stocks as companies that share price is less than $5. This means that there are many large companies whose share price is less than $5. Some of the largest companies that fall in this category are SiriusXM, Office Depot, and Groupon. There are a number of reasons why companies listed in the large exchanges like NASDAQ become penny stocks. One, maybe these companies listed their shares in that range. Second, the companies might have fallen out of favor from the investors. For instance, a while back, a company called Lending Club saw its share price fall to $4 before rebounding. Another reason why this happens is because of the market cycles. In many cases, penny stocks are not quoted in the large exchanges. Instead, they are quoted in the over-the-counter boards. OTC boards are not as regulated as those in the large exchanges.
How to Buy Penny Stocks Now
So, are you ready to take the risks and enter the field of online penny stock trading? This is a common situation that many people find themselves in. They wonder whether it is profitable to be in the penny stock business or not.
If you are committed to becoming an online penny stock trading, you should follow a number of steps. One, you should identify a good broker. As mentioned above, the broker should be efficient and have a good reputation. After finding the broker, you should do your analysis on the companies you want to trade. As a rule, you should avoid holding penny stocks for the long term. This is because you can’t really tell what will happen in the future when trading these companies. For instance, in many cases, penny stocks can go as high as 100% per day. This means that they can also decline at the same level. After doing your analysis, you should buy and wait until your profit is reached and exit the trade.
Finding Great Stock Picks
A common question asked by many people is on how to find the best penny stock picks. A perfect answer has not been provided to date. This is because in penny stocks, you don’t look at the company’s financials and projections. Fact is that most penny stocks in the OTC market do not release all the relevant information. Therefore, when making the decision, you simply can’t rely on their fundamentals. For NASDAQ penny stocks, however, it is possible to find this information from the company’s investor relations. However, since they are often not tracked by the media and the sell-side analysts, it becomes a major challenge for traders. The best way to find great penny stocks is to conduct a thorough technical analysis. This analysis will help you identify price movements.
Where Can I Buy Penny Stocks?
As mentioned above, there are many brokers who enable people to buy and sell penny stocks. These brokers have integrated the data from the exchanges to their platforms which enable people to trade. As mentioned above, since many penny stocks are quoted in the big exchanges like NASDAQ, you can trade in the normal brokers. The advantage of trading these stocks is that you can easily get the right information from their disclosures.
The stories of online penny stock trading have dominated the financial market for years. Stories of how people made a fortune in the industry and how many lost have been written and aired on TV. Many people continue to be very pessimistic about the industry. However, just as it is in the large cap stocks, trading is always risky. People who bought a company like Valeant (VRX) which was trading at $250 made losses when the company fell to $14 a share. Always remember that trading is a risky business and you can lose your money on any investment.
