Penny stocks are usually referred to as stocks who market value is less than 5 dollars. However many penny traders usually refer to stocks trading at a fraction of a dollar as penny stocks. CompareBroker team has studied and compiled following list of brokerage firms which specialize in penny stock trading and OTCBB stocks. This also includes pink sheet stocks trading.
If you are a penny stock trader, you might not be holding the stocks for more than a few days. Some penny stock traders are day traders. Therefore, you need a penny stock broker that has a table trading platform. The second important thing to look for is the brokerage commissions. Since short term traders are usually more active than long time investors, hence a small difference in commission structure can amount to a large difference. There are many Penny Stock Brokers, we have compiled a list of best ones for you.
Penny stocks trading is not suitable for everyone because it usually carries more risk as compared to medium and large cap stocks. Small fluctuation in the price of such stocks usually means huge percentage move, due to really low stock price. These fluctuations can cause serious damage to your trading account.
High priced stocks usually belong to companies which are more stable and hence supported by institutional investors. On the other hand penny stocks trading involves small companies and can be easily manipulated by big day traders or group of malicious traders. For example small negative press release can cause a major downfall in the stock price of such companies. Given the volatile nature of such stocks, we recommend investors and traders to be cautious while trading penny stocks.
If you are a beginner, we would advise you to not go for penny stock trading. The risks involved are:
For buying penny stocks, you need to start your research on hot penny stocks. There are several websites with penny stock alerts, news, and newsletter, where you can you the penny stock screener to find the right penny stock. After you have chosen the stock, you will next have to select one of the above listed penny stock brokers. Penny stock investing is already a risky game, if you don't have a broker that can support you, you will not be making profitable trades. While choosing a penny stock broker, pay special attention to the commissions being charged.
TD Ameritrade stands out in the list of brokers for it does not charges extra commissions on penny stock trading. You have to pay the usual $9.99 to buy penny stocks.