When trading penny stocks, traders should remember that penny stocks are companies whose shares trade for under $1. They are known to be often risky investments, and are usually trading for such little money because the company is in a state of financial disaster, with an uncertain future that could go either way.
When searching for good sites to purchase penny stocks, traders be on the lookout for brokers that do not charge additional fees on top of original stock prices. This is a major factor that the investor can control and should not be overlooked.
When looking for a good site, make sure there are:
No additional charges for low-prices stocks: Some sites will advertise their supposedly good transaction fees as part of their effort, but avoid telling traders that there are a number of added costs. Some brokers charge a percentage of the total trade value, whilst others might a fee per share purchased. Either way, the trader will be getting charged more than they would for a normal blue-chip stock trade, and most certainly if the broker charges a fee per share as penny stocks are often traded in vast quantities.
No unreasonable volume restrictions: Timothy Sykes says “If a trader were to find a stock that they would like to purchase for 1 cent, and are planning to invest $1000 – this would mean that they would be buying 100,000 shares. Any broker that charges either for large trades, or requires that the trader splits up their order into multiple smaller orders is not sensible to use for investing in penny stocks. A reasonable number to look for would be 1 million shares, that is, sites that allow investors to purchase up to 1 million shares (or invest $10,000 in stocks at 1 cent for the case of this example) and still avoid being charged extra.”
No Costly Add-Ons: due to the harsh nature of penny stock investment, some sites could require that you upgrade to products like premium accounts – these tend to be filled with additional usage fees and upped minimum balances. Some also may require that you place orders via telephone to a person, meaning high unforeseen service charges.
Remember: if you are looking to enter penny stock trading, you should ensure that you are whilst minimising any possible additional costs and difficulties.
A Low Minimum Account Balance: Often, people that are trying to invest in penny stocks do not have a large amount of capital that they are happy to or able to risk. This means in response, that it is important for a good penny stock site to have a low/non-existent account minimum balance. Because of the unpredictable nature of investing in penny stocks, it is not common for penny stock traders to see their original investment reduce at a fast rate, because of which a low minimum balance requirement should be constant and not merely a sign-up perk. This will cover the trader should an investment go badly wrong.
Finding a good investment:
A lot of the companies that trade with share prices of less than a dollar have small market shares. When looking to invest in penny stocks, it is important for the trader to take note of the strength of the company’s fundamentals – if or not the company is profitable, and if or not if it will be able to enter profit with its current business structure, and whether the company is reliant on issuance of new shares to generate capital. If a trader learns about an organisation, potential it may have, and its current place, there are countless investment opportunities to be had.