HOW TO INVEST IN PENNY STOCKS

HOW TO INVEST IN PENNY STOCKS

Penny stocks are common stocks whose value is less than a dollar. They are highly speculative. However, as the stock market is constantly changing, so does the value of penny stocks. They are currently valued below five dollars. The main reason why people invest in penny stock is in order to sell them for profit. However, as mentioned before, it is a very risky investment.

Due to their low prices, investors are able to purchase a large number of shares at a small fee. This enables them to reap a lot when they sell the shares. The shares are sold when their prices increase. However, in as much as it is possible to make high profits, it is also very possible to incur great losses.

Engaging a stockbroker to handle your buying and selling of penny stocks is a wise decision. This is because in most cases they are more knowledgeable about the market than you are. Even though they charge a commission, the profits you gain from selling your penny stocks compensates for that. They are able to advice you on the hot stocks to buy and the penny stocks to watch.

What should you look for in a penny stockbroker?

There are many stockbrokers around and getting the best one for you requires you to look out for the following

  1. Fees

Stockbrokers usually charges commission. However, this is dependent on the broker. There are those that will charge on a per-share basis. In this kind of charging, a particular price is set for the first bundle of shares and then an additional fee is charged for each additional shares. However, this fee structure is not the best for penny stock traders. The best kind of fee structure for penny stock traders is one that gives a flat rate per trade.

  1. Trading platform

You need to consider the available trading platforms that the brokerage is offering. There are some brokerages that have an online platform, which you can also access through a mobile app. Others will have a call and trade kind of platform. The online trading platform allows you to watch how the market is performing as well as your stocks closely. You will also find online facility cheaper compared to telephone facility, as there are charges on each call you make.  Having a brokerage that offers online facility is therefore an advantage compared to telephone trading.

  1. Depot and nostro facilities

These refer to a depository account and a bank account. The depository account is where you keep your shares while a nostro account is where you keep your trading money. For a penny stock trader, you ought to go for a brokerage that offers both depot and nostro facilities. This is because the penny stock trading is speculative in nature; therefore, you need instant and reliable money transfer. If there are any delays in the money transfers, it may be dangerous for your trading.

There are numerous other tips that you can access online including information on the hot stocks to buy and penny stocks to watch. This information will help you get to understand the penny stock market more as well as increase your profits.