How To Trade Penny Stocks

Investors can find out how to trade penny stocks by searching the Internet or by contacting a broker. Penny shares are traded outside the major stock exchanges. The attractiveness to buying and trading speculative security or penny stock is because the shares are priced low. Speculative security is normally available through smaller companies. An investor should use some wisdom in determining how to buy penny stocks and what companies to invest in. Buying and trading low-priced shares are considered high-risk because only small amounts of shares are usually available on a daily basis. Changes in supply and demand could cause shares to gain or lose value very quickly. In addition, the requirement for these types of shares to be listed on the market are not regulated compared with companies that list with the major stock exchanges. Companies that are listed on the major markets have to provide financial information that shows financial stability to the public.

Speculative security shares have a higher chance of being subject to fraud because the company who lists them can show bogus information on financial health and the investor has no way of verifying that information. Before becoming a victim investors need to have knowledge about how to buy penny stocks. Securities that are not listed on the major stock market are usually listed on the over-the-counter (OTC) Bulletin Board or Pink Sheets. Shares that are listed on Pink Sheets are not part of the stock exchange and normally do not meet the listing requirements of the major exchanges. The Pink Sheets are available to companies that have financial difficulties, are in bankruptcy, or are not audited by an outside auditing company.

Investors who are truly interested in learning how to trade penny stocks should contact a broker. A broker can evaluate an investor's financial situation and help him or her determine if speculative securities are the best choice. A brokerage firm will usually provide the investor with a monthly account statement showing the value of shares. An investor should choose a broker that has an honest reputation and one who is very knowledgeable about buying and selling stock. Full service brokers provide more information and help than discount brokers. However, discount brokers do not charge the fees that full service brokers charge. A full service broker will help the investor find a buyer on shares for sell whereas a discount broker provides mostly advice and information helpful for investments.

Companies that have become public and are selling shares are hoping to expand and experience growth. People who buy stocks into a company share in the ownership of that company. A person who chooses to own shares in a company can purchase those straight through the company instead of using a broker. However, when it comes time to sell those shares a broker may have some contacts that can lead to selling faster than an investor trying to do so on his or her own. When the investor chooses to buy shares that are inexpensive a broker may recommend learning how to buy penny stocks. The price of the stocks is based upon market conditions, inflation, oil prices, growth margins, and other market factors.

Deciding on a company to invest in that is listed on the Pink Sheets can be accomplished by doing some research. One thing to determine is if the company is financially secure. Companies who list speculative securities are not regulated by the Securities and Exchange Commission (SEC) so there is no way to be completely sure of the company's financial status. One thing that learning how to trade penny stocks will teach an investor is that they are risky. However, any good investor should know that any type of investment can be risky. There is always a chance that the investment will turn out to be unprofitable. "Let integrity and uprightness preserve me; for I wait on thee" (Psalm 25:21). Ask God for direction using integrity with upright investing and making smart choices.

The Internet has many sites that offer an investor options on trading. Some of the information found on these sites will teach a person how to buy penny stocks. Trading online can be simple and can be done from any computer that has Internet service. Most sites online charge a membership fee and then they recommend shares to buy and sell to their members. The amount of stocks or shares that are picked may vary by company. Some companies offer as few as three picks per month whereas others may offer up to ten per month. There are many claims made by companies who offer these services online. The best way to choose a company is by doing some research and asking for the claims they make to be backed up with written documentation.

Penny stocks are not the kind of investments that a person should consider if he or she wants shares that slowly grow over several years. Many investors that have found out how to trade penny stocks have also discovered that the smart way to invest is to do it using various avenues. In other words, do not put everything on one type of investment. Other types of shares that are sold include common, preferred, and treasury shares. Common shares become treasury shares if the corporation buys them back from the investor. Preferred shares provide the most advantages towards ownership. Some of these include advanced voting rights and dividends. A person who is a preferred shareholder gets paid first when a company has to file bankruptcy.