Penny Stocks

Buying and selling penny stocks

Penny stocks can be highly profitable; however, they can be highly speculative. Information about penny stocks is not as available as information on stocks that trade on AMEX, for example. Also, trading activity doesn’t occur as frequently compared to stocks such as Dell or IBM. They’re not as liquid. If you have a lot of money wrapped up in a penny stock, and heavy selling occurs that day, you can lose a significant amount of money because the penny stock may or may not recover.

You also won’t find listings of penny stocks in financial publications, so you'll need to look for other sources. If you intend to buy and sell penny stocks, here are three steps you should take:

1. Sign up with a broker to buy penny stocks online.

2. Use financial websites to help you decide when to buy and trade penny stocks.

3. Use over-the-counter (OTC) Bulletin Board and Pink Sheets to get listings of penny stocks.

 

Sign up with an online broker for buying penny stocks online

You can buy penny stocks online and save on commissions. Online penny stocks discount brokers will also provide you valuable information on penny stocks. Gain crucial information on the company, such as news, fundamentals and earnings. You can also use charts for timing and investing in penny stocks.
Try: Buy penny stocks online with either TD Ameritrade or optionsXpress. They'll provide information on penny stocks such as charts, earnings, or price per earnings ratio. Both of these online brokers charge low commissions.

Buy and trade penny stocks by using recommendations of financial websites

Use these online publications to help you discover what penny stocks you should buy. These are valuable resources because they focus specifically on penny stocks. You will find essential information, such as an explanation of penny stocks and what companies have potential high earnings. These websites provide market research, much like Morningstar.
Try: You’ll want to register at PennyStockInsider.com, which is only available to subscribers. Pennystockinsider.com picks the top companies, based on their management, fundamentals, and debt levels. FutureGems is an independent electronic publication that profiles small companies. It also tells you in which companies it bought shares.

Use OTC Bulletin Board and Pink Sheets for listings of penny stocks

These are two websites you'll want to visit frequently. You can find objective information to help you make better trading decisions on penny stocks. These websites give you the bigger picture of the penny stock market. If you want to research a particular company, you can type in its ticker symbol and get information such as insider activity.
Try: OTC Bulletin Board is like NASDAQ and AMEX, where you can check on the market's overall health. You also can obtain overall information about penny stocks. Click on a stock and call up detailed information on the company. You’ll also want to check out Pink Sheets. This website will give you similar information to what you’ll find on OTC Bulletin Board; however, you'll find a different list of penny stocks.

 

• Talk to companies' investment representatives, whenever possible, to get more information about what they do, and their products or services. When investing in a speculative field such as penny stocks, you need to be comfortable with the representative who is handling your money. You also need to be aware if the company has any vested interest in promoting a certain stock.

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