Beginner's Guide on How to Trade in Penny Stocks

Posted on: June 13, 2013
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Many investors just starting out in the market want to trade penny stocks but they don’t realize these stocks are different from regular stocks. These stocks are not only cheaper but they are traded differently too. The rules are also different. Blue chip companies have different rules than many low priced equity stocks.

You can trade penny stocks easily though using an online trading platform through a brokerage. There are many brokerages that offer penny stock trading and it’s up to you to decide which brokerage you feel most comfortable with. Trading yourself is easier and cheaper than having a broker do it for you who will eat up a lot of your profits with their commission fees.

Penny stocks trade on the OTCBB bulletin board and the Pink Sheets while traditional stocks trade on the Nasdaq, NYSE, and the AMEX. Penny stocks are not stocks you typically want to hold on to. You want to get in and sell them as fast as you can for a profit. Once you make a profit, re-invest into another penny stock and try to capture a profit again. These stocks can be very volatile and swing in either direction. Be prepared to encounter losses.

Don’t let that scare you though. Penny stocks can make huge moves north, moving as much as 100% or higher in just one trading day. Penny stocks move quickly and can usually be made in one to two trading sessions. The people who lose money in trading penny stocks are the ones who get greedy and try to hold the stocks too long.

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