Clear doubts about “How to Trade Penny Stocks”

There are some basics you need to understand before you learn How to Trade Penny Stocks. You need to recognize that this is a profession with uncontrolled deception and tons of exploitation. You must appreciate that any kind of real stock trading is a serious business involving real risk with real money. In this article, I will explain the basic steps you need to master to execute a penny stock trade.

Selecting a right broker:

Select your broker; be very, very careful that you are selecting an established and reputable broker and not some kind of ambiguous deal maker you find online. It is not unusual for savvy investors to take advantage of beginner investors, especially in the area of penny stocks. So stick with established, known entities.

You’re Investing Capital:

The next major step and the step that indicates what you really mean by this business. You have to connect your bank account with your broker account. I urge you to setup a separate bank account from your primary checking and savings accounts for your penny stock trading. I also encourage you to not start trading until you have significant capital separate from living expenses in your trading account.

Executing the Trade:

Now prepare the following information for your broker to execute the trade. First, find the quotation service where your broker can identify the stock. Next, define for him the stock's ticker symbol within its listing service. Then you must specify the exact amount (or "volume") of the share you want to buy. Keep in mind that despite the term penny stocks, you will likely need to buy in multiples of a thousand shares to keep the brokerage fees reasonable.

Now describe your exact buying price and the expiration date for that price. Sometimes, especially with penny stocks, buying a share isn't an immediate process. The expiration date defines for your broker how long he should keep the order active. Once that date hits, your order expires. This makes it so you don't accidentally buy a dated stock which you may not want anymore. And then when you sell, you use a limit order to sell.

These are just the very basics of how to trade penny stocks. I encourage you to do your due attentiveness and practice with paper trading prior to ever putting your money at real risk. Then find a stock broker, connect your account and start executing order. I hope all your doubts regarding ‘How to Trade Penny Stocks’ is clear now.