How to Buy Penny Stocks

How to buy penny stocks? When you buy penny stocks it involves both dedication in time and money. You will need a few hours per week and a few hundred dollars to start off with. You will first need to find a broker that will allow you to buy penny stocks for just a few hindered dollars. Be sure to look for a good reputation broker that has your best interest in mind. Many brokers have special discount rate for bulk trading. This can be valuable for you if you are going to be doing a lot of trading.

Buying penny stocks will not make you rich over night. You have to be patient and wait a few months to a few years for your penny stocks to increase in value. Or, you might want to sell some of your losing stocks as soon as possible.

Before you buy penny stocks, you need to research the market capitalization of a company. This an be done be multiplying the stock price of the company by the number of shares that are outstanding. By doing this, you can determine the total dollar value of all shares in the company. Penny stocks are not traded on the major stock exchanges such as the NYSE and Nasdaq. They traded on the over the counter bulletin board (OTCBB). Majority of penny stocks are traded by a broker that acts on the investors behalf and arranges a transaction between the investor and a third party. The broker gets a commission for arranging the trade.

After you’ve done your research you may be thinking how to buy penny stocks. Mainly all penny stock transactions are charged by brokers. The brokers don’t receive any commissions but they make their money from the sell and buy spread of the stock. There are no particular ways that penny stocks are purchased. They are purchased and sold between the bid and the ask price or what as known as the spread. A lot of stock spreads are usually about 25 to 33 percent but can be as high of 50 to 100 percent or even more. It might also have 2 bid prices and 2 ask prices, these are known as the inside and the outside bid and ask prices. Typically it is the outside bid and ask prices that are used. Penny stocks can also contain mark up prices. This is where a broker holds the penny stock in its account so as to reduce the risks associated with market price volatility.

Penny stocks can be rather complex and there are a lot of risks associated with trading penny stocks. However, it performed properly it has the possibility to change small investments into huge gains. With any investing, it’s ideal to seek advice from a qualified broker.