How to Buy Penny Stocks
Jan 8th, 2010
Buying penny stocks is really no different from buying regular stocks. The process of going into your stock trading account and setting up a purchase order is nearly identical. For the sake of review I will put up the steps necessary to buy penny stocks
How to Buy Penny Stocks – Step by Step
1. First thing to do is to set up a stock trading account. If you already have a broker make sure they deal in OTCBB and pink sheets in order to have the most access to penny stocks. Setting up an online stock trading account is an easy process. Find more details about opening a stock trading account here.
2. The next step is to fund your stock account and get approved to purchase stocks. Most brokers allow you to fund the account by wire transfer, check, checking account transfer and other methods.
3. Before you actually go out and purchase penny stocks it would be a good idea to practice stock trading. Once you are comfortable with the interface of your new stock broker you can go to the order screen on your real money account.
4. Place an order for the penny stock you wish to buy. You should familiarize yourself with the different order types before making your trade. In most cases you will want to place a limit order when buying penny stocks. This type of order allows you to control the maximum amount that you will pay per share.
5. That’s it. If your limit order executes you will be the owner of a penny stock.
There are a few things you should know besides how to buy penny stocks. Penny stocks can be a very risky investment. The regulations on OTCBB stocks and especially pink sheets are much more relaxed than stocks that trade on one of the major exchanges. The definition of penny stocks also varies when talking to different people. The SEC defines penny stocks as stocks trading for less than five dollars. There are many reputable companies trading on major exchanges for these low prices these days. You really need to be careful when investing in penny stocks not listed on one of these exchanges. Without the regulation required by the big stock exchanges there is a much greater risk of price manipulation.
Make sure to read the fine print in the terms and conditions of your broker. Some brokers charge an extra fee when a stock price is under a certain threshold. If you are going to buy a stock for $0.03 per share and your broker is charging a fee of $0.01 per share it may make the trade unpalatable.