At first glance, penny stocks can seem like one of the easiest ways to get into stock and share trading. After all, you get to spend small amounts of cash and hopefully, earn a lot of it within a short amount of time, however, just because penny stocks aren’t as expensive as some of the other investments on the market, doesn’t necessarily mean that they don’t have their own complexities to consider. Learning a thing or two about the nature of penny stocks and their trading patterns can help you to start your investment strategy on the right foot.
What Are Penny Stocks?
The first thing you need to know is that a penny stock is any stock trading for less than $5 per share. A few years ago, penny stocks used to be any stock trading under $1, but thanks to inflation, we’ve had to push that number up to adhere to the current marketplace. Importantly, you generally won’t be able to find penny stocks on the standard market exchanges that most investors use, like NASDAQ or the New York Stock Exchange. Most of the time, these stocks are traded through the pink sheets and the OTCBB.
While some investors consider penny stocks to be high-risk investments, that doesn’t have to be the case. Additionally, if you are willing to get involved with some of the riskier penny stocks on the market, then you could open yourself up to higher rewards too. What’s more, since the stocks are low in cost, you can reduce some of the risks by trading in smaller numbers, to begin with.
How Does Penny Stock Trading Work?
Generally, the best way to start your experience with penny stocks is to find a broker in your area and start educating yourself about the state of the market. The more you learn about the financial space, the easier it will be to choose the right stocks. Once you’ve started to find stocks that you want to invest in, you’ll be able to start trading them on markets like OTC Link, OTCBB, and the Pink Sheets. The types of stocks that you can find in the Penny stock market can be just as diverse as the ones you would find in any space. The only real difference is that you’re paying a very low price per trade.
How to Get Started
You’ll need a highly experienced broker to handle penny stocks, and it’s important to make sure that you choose someone who has worked with similar stocks before. Remember, one of the things that makes Penny stocks so risky is the fact that they are highly speculative. Choose the right broker and trading strategy, and you can take your high-risk trading pattern and transform it into a high-reward balance.
Remember, when choosing the first stocks for your penny stocks experience, start by looking at the sectors and markets that you feel most interested in. Your knowledge of a specific marketplace will help a great deal when it comes to choosing stocks that you feel comfortable investing in.