How to To Buy Penny Stocks

Penny stocks are shares in small companies which are publicly traded. These shares are often worth less than $1 each. A penny stock may also be thinly traded. This means that the stock does not have many buyers and sellers. When trading in these stocks, you should understand how the company makes money and how you will exit your position to claim any profits you make. First, you need to understand how to buy penny stocks.

Instructions

1. Contact a brokerage firm. You'll need a brokerage account. Your bank may have an in-house brokerage service that you can use. If not, you'll need to contact an outside broker.

2. Apply for a brokerage account. You must submit your name and other personal information to the brokerage. This includes your Social Security number, your home address and where you work. You'll also be asked about your annual income and how much money you plan on investing. If you're using an online brokerage account, you can submit all of this information online. Offline brokers require a paper application.

3. Ask your broker about penny stock offerings. You'll need an investment adviser to help you locate penny stocks that represent a good value, unless you are familiar with how to perform the complex mathematical calculations for determining a stock's value.

4. Buy the stock. If you're using an offline broker, you place the order over the phone or in person with your broker. If you're trading online, then you'll make the purchase through your online brokerage account. You must input the stock symbol, the number of shares you want to buy and the day you want to purchase them. You may also specify a sell order to limit losses on your stock position. A loss order will tell your broker to sell the stock when the stock falls below a set dollar amount per share.

Tips & Warnings

• Penny Stocks can be very profitable but you have to be careful

• At the same time it can be dangerous to invest in penny stocks because of the way they are promoted. Investors promote penny stocks on forums, message boards, blogs etc. After some experience you will be able to see that and not fall for fake promoters.

References

• "USA Today": Opening an Online Brokerage Account Takes Some Time; Matt Krantz; October 2007
• "The Intelligent Investor, Revised Edition"; Benjamin Graham; 2003