Penny Stock Brokers 4u

Buying penny stocks is somewhat different than investing in other investment vehicles; however, there are some similarities. Although penny stocks are generally not traded on the major stock exchanges, such as the Nasdaq or the NYSE, you nevertheless need a broker to make the purchase. Penny stocks are traded on the OTCBB (Over-the-Counter-Bulletin-Board) and the Pink Sheets. Neither of these has the regulations of the major exchanges so it can be difficult to get information about the companies offering these types of stocks.  This makes it difficult to determine whether the company is offering these shares as a way to quickly inject some capital into their business because they have a new venture that needs funding, or as a last ditch effort to avoid bankruptcy. Due to the lack of regulations involving penny stocks, there is even the chance that the offering is a complete fraud with no company whatsoever. So before you ask yourself, “How do I buy penny stocks” you may first want to be sure that your level of risk comfort is such that you can afford to lose your investment.

Assuming you have a portion of your portfolio you are comfortable risking, then the question of “how do I buy penny stock” is fair to ask and here’s how you go about investing in penny stocks:

First, locate a penny stock broker. You will want to carefully research the various brokers carefully as not all are going to have a commission structure that works particularly well for penny stocks. Some brokers will even charge additional fees for handling penny stock transactions. There are some brokers that do not cover them at all because it is too complicated to track them. Beware of online companies that are not approachable for customer service because even a discount brokerage should be available to answer your questions. You will need to determine whether you want a full-service broker or a discount broker. Although a full-service broker provides advice and assistance, their higher fees may not be feasible for the penny stock investor. Review the website of the various brokers to determine whether their website is user-friendly enough for you to operate and provides the tools that you need it to. Also be sure transactions are handled quickly and the site is reliable. Although penny stocks are usually held for a fair amount of time before selling, if the window is small for the optimum gain on sale, you don’t want to miss it because the website is down.

Second, review lists online of penny stock the experts are recommending. Look at those companies they suggest to see why they are suggesting them. Even if you do not go with one or more of their recommendations, you will have further educated yourself as to what the red flags are for a loser and what makes a penny stock more attractive and thus safer to invest your money into. Additionally, read anything you can get your hands on – newsletters, blogs, etc – that will further your education on these volatile investments.

Third, choose a few stocks that you think look good and you believe will provide the level of profit you are expecting in the time period you need it to do so. At this point if you are ready to invest, be sure to research the companies as much as you can. Look for any red flags carefully. If you think you need a bit more time to familiarize yourself, then just note the ones you were thinking of and their prices, follow them for a few weeks or longer, and see if your investment would have paid off for you. Taking this step takes some patience but if all your choices failed on this ‘dry run’, you know you need more time to be able to spot the winners and losers more effectively before you put real money on the line.

Next, watch your stocks regularly. Look for news on your stock and its industry. Review trends happening in that sector. This is important for a variety of reasons:

• Trends affect your stock’s value – this can take its value up or down depending on the favorability of that industry at any given time
• Type of trend – is it a short-term trend or a long-term trend? A short-term may start dropping the value but if you hold out and don’t sell at a loss, it may rebound. A long-term creating an increase may be enough to sustain more than the gain you originally anticipated and selling too soon will put the additional profits in someone else’s pocket
• Industry News – good or bad, news in an industry can seriously affect the price of a stock; for example, a huge oil spill will affect stock prices not only for oil companies but also for other industries that may be affected by it such as companies that provide clean up services or companies located near the spill whose business will be affected.
• Company News – watch for press releases on your company – too many press releases can indicate the company is headed for trouble or for a wonderful explosion in value; read them carefully and think of how the press release(s) may affect public sentiment.

Lastly, know when to hold them and know when to fold them – as true in penny stock investments as in a poker hand. Timing can be incredibly crucial when it comes to selling your shares. Furthermore, it is human nature to succumb to greed and fantasy – seeing that $1 share go to $2 and thus reaping a 100% return can make you see that huge payout “if only” it would do that doubling again and again. But remember, “IF ONLY” thinking can be rather dangerous. Unless you see some spectacular and verifiable news that would strongly indicate it has a very good chance of continuing to increase in value, take your profits at the goal you originally set for that stock and move on.

Investing in penny stocks can be a rewarding experience, or a dismal failure, but taking the time to prepare yourself before beginning should improve your odds.