Penny Stock Trading Strategies
Only after you understood the basics, completed your research, found penny stocks to watch, and opened a brokerage account, you can begin trading. Treat your penny stock trading as a business and conduct due diligence. Avoid ‘market’ orders; always set ‘limit’ orders to control your point of entry.
You will have to buy penny stocks online at an ‘ask’ price and sell them later at ‘bid’ price. The difference between the two is called the ‘spread’, and it is usually significant in penny stocks. It is crucial to cover the spread to make profit on your investment.
Stay clear of penny stocks that are not trading on major markets. The best exchanges to find cheap stocks are: NASDAQ, OTC-BB (owned by NASDAQ), AMEX, TSX (Canada) and TSX-V.
The Best Penny Stock Brokers
Nowadays there are many inexpensive online brokers, which are affordable for retail investors. The best broker for penny stocks is determined by what kind of penny stocks you trade (exchange traded, OTC, or pink sheet), how much capital you have and how often you trade. Each broker will have different account minimums, trading commissions and trading restrictions. Some brokers are restrictive with penny stocks because of their bad reputation. You should also consider the quality of customer service, the user friendliness of the trading platforms, and order execution speed.
penny stock brokers
Penny Stock Broker Checklist
Fees And Commissions – Penny stock trades usually involve a large number of shares, so you must find a broker that charges a flat commission instead of a per-share commission. Be sure to ask about any additional fees before making a decision.
best penny stock broker
Trading Restrictions – Keep an eye out for online penny stock trading sites, which impose limits on the types of trades you can execute with them. For example, many brokerages don’t allow customers to short penny stocks. And some don’t trade stocks valued under a certain amount, like $0.05 or $0.01.
Volume Restrictions – A good penny stock broker will allow you to trade unlimited shares without additional fees. Some brokers limit the number of penny stock shares you can trade in one order, forcing customers to pay another commission.
If you already know how to invest in penny stocks, the next step is to choose a penny stock broker. The following online brokerages are recommended for penny stock trading. The best penny stock broker charges flat rate commissions, which is ideal for minimizing cost when trading thousands of shares.
TD AmeritradeTD Ameritrade / thinkorswim
TD Ameritrade offers top-notch customer service. They also offer a free paper trading account, which is extremely useful for beginners, who want to test their penny stock trading strategies before getting their hands dirty with real trading. They have an amazing trading platform and excellent research tools, with introductory videos to help get you started. The account minimum is only $2,000. There are no penalties for large orders and to buy penny stocks, no monthly fees, no inactivity fees, though the commissions are a bit higher compared to other online brokers. This is definitely the best broker for penny stock beginners, though you will not be allowed to short penny stocks. You can trade free for 90 days. The flat trading fee is $9.99.
Their trading tools, research tools and execution speeds are almost as good as TD Ameritrade’s. The account minimum is $1,000 for cash account and $2,000 for margin account. There are no penalties for large orders, and you can trade for free in the first 60 days. E*TRADE is perfect for investors who prefer to buy and hold and only trade a couple of times throughout the year. The flat trading fee is $9.99.
Interactive BrokersInteractive Brokers
This is probably the most popular online brokerage, but it is not ideal for penny stock investors. The customer service is average. The account minimum is $10,000. The trading platform is not recommended for beginners, though it is considered the best on the market. There are absolutely no trading restrictions, for example you can short stocks under $1 per share. They charge $30 monthly for inactivity, and they also charge fees if you modify an open order. Their commissions are simply too expensive if you are trading large volumes of shares: $0.005 per share.
This brokerage does not allow shorting, so this can be a deal breaker if you intend to short penny stocks. Their Idea Hub service is amazing, though. Investors can search for trade ideas by category, including earnings, volatility and market sentiment. The customer service is good, though email responses can be slow. There is no account minimum. You receive $100 cash for a new account. The flat trading fee is only $8.95.
Finding Penny Stocks To Buy
Your success in penny stock investing begins with finding the best small companies and then profiting as their share price goes up. With so many investing opportunities out there, choosing winners can be difficult and intimidating. There are strategies to buy penny stocks however, by narrowing down the thousands of stocks available for trading. Stock screeners can help you reduce your total number of choices to only a few stocks and improve your chance of success.