How To Trade Penny Stocks

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Trading penny stocks?

Well I am 19 and have never done much of anything with stocks other than be told I have money in a mutual fund. All I really know is penny stocks are usually considered any stock that is under $1 sometimes less and I would like to put a few bucks into trading them just to see how it works.

So my question is how do I get started on trading penny stocks with a small investment of about $20 and no knowledge whatsoever?

I think you should do some more reading about the markets and the products traded in those markets. By industry standards, a “penny stock” is any stock selling for less than $5.00. One of the primarily reasons for the $5 cut off was established because stock selling less than $5 are not marginable.

You will not be able to find any brokerage firm in North America that will permit you to open an account with $20. Commissions/fees will cost you about $7 per transaction. Reputable brokerage firms do not like to cater to those customer that want to trade in penny stocks and do whatever they can to discourage such transactions.

When you invest/trade in penny stock you should never put up more than you can afford to loose and you should assume you will loose it all. Unlike regular securities, penny stocks usually do not let you use risk cutting procedures (options and/or stop orders) since most are not traded in a regulated market place.

They say when you buy securities you have a 50%-50% chance of making money, when you buy penny stocks you have a 50-50-90% chance, 50-50 chance of making money and a 90% chance of loosing money.

When buying penny stocks, like any other security investment, you never invest 100% of you investing capital. Penny stocks are fun to trade, but you should never count on them to be considered part of your primary investment objectives.

All that said, here are some websites that you will find helpful. Use them to study more about penny stock, not only the stocks themselves but also the markets in which they trade.

How To Pick A Penny Stock To Trade

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