How to buy penny stocks

Investing in penny stocks is a risky business and it can be a little complicated. How can you buy penny stocks?

Difficulty: Moderate

Instructions

Things You'll Need:

• High risk tolerance
• Brokerage account

1. Stocks are generally considered penny stocks when they trade for under $5 a share, but the truest form of a penny stock is a stock that trades on the over the counter bulletin board exchange (OTCBB).

2. In order to buy penny stocks on the OTCBB an investor needs to setup a brokerage account. Make sure you signup with a broker who allows over the counter trading, although most do now.

3. If you are interesting in buying penny stocks it is likely that you will be buying and selling fairly often so I advise that you use a discount brokerage account. Many of these allow you to trade penny stocks for less than $10 a trade.

4. Buying a penny stock is very similar to buying a regular stock. One difference is that penny stocks trade on different market exchanges so you will need to know where the stock you wish to buy is trading before setting up your order.

5. Before investing in a penny stock you should monitor the stock to see how liquid it is. If the stock isn't liquid you will have a very hard time making any money on it. Penny stocks are far more risky than most, so before you buy, do your homework!

Tips & Warnings

• Do extra homework and prepare to put lots of time aside for research.
• Most people who invest in penny stocks lose money rather than make money.
• Penny stocks have a major lack of information that is much more available with regular stocks. You often don't know what you are buying.
• Penny stocks often are pumped and dumped by big traders looking for a quick buck, which hurts the average investor.

[carolzn]

on 9/13/2009 Great topic. Thanks for writing this article.

[mattsaboy]

on 9/8/2009 Excellent article. 5 stars and a recommendation.

[LittleMomma316]

on 8/20/2009 Great info. Thanks! 5*

[kellieann2000]

on 6/4/2009 Thanks for the info on penny stocks.

[tracysmith159]

on 5/15/2009 Great Article on buying penny stocks. I found E*Trade so far for a discount broker. I'm going to check out some more.