They are typically issued by small, less-established companies. Community Dashboard Random Article About Us Categories Recent Changes.

Write an Article Request a New Article Answer a Request More Ideas Be aware of the benefits of purchasing penny stocks. Because penny shares can be purchased so cheaply, they represent an opportunity for enormous gains through high-volume purchases.

Be aware of the downside, too. Penny stocks are not very liquid, meaning there may not be much demand for them, and as a stockholder, you could have trouble finding a buyer, should you want to sell your shares. In addition, the issuers of cheap stock may suffer from a weak market position and a fragile financial profile, making them risky investments.

Investors in penny stocks should be prepared for the possibility of losing their entire investment. They are not traded on major exchanges such as NASDAQ or the NYSE , so it is best to buy them without a traditional broker. The speculative nature of penny stocks lends itself to a "do it yourself" approach through an online brokerage service. Determine if penny stocks fit your investing strategy.

Stock issued by small, young companies represents the chance for very high gains but carries the strong possibility of significant losses, too. Investing in penny stocks should be considered part of a short-term, speculative tactic rather than a longer-term strategy. As in any investment, never contribute more than you are willing to lose.

Penny stocks are not traded on major exchanges, and are instead traded "over the counter. Instead of trading at a pre-determined price, you will wind up buying penny stock at the lowest "ask" price you can find or selling shares at the highest "bid" price you can find.

Ask prices will vary among sellers, so shop around. Investigate a company before purchasing their stock.

The Beginner's Guide to Investing in Stocks | Learn More

Buying penny stocks often means investing in small, emerging companies. While it may be hard to find a lot of information on such companies, it is important to examine their financial health before investing.

You can find financial information on many small companies on sites like Google Finance or Yahoo Finance. For information catered specifically to the over-the-counter penny stock market, use services like the OTC Bulletin Board and the National Quotation Bureau. A good opportunity to buy penny stock occurs when a company makes an initial public offering IPO.

This is a company's first move into public ownership. Be prepared by reading the company's prospectus before making an offer. Be aware of the possibility of fraud in penny stock investing. A common tactic used by sales people is to buy large amounts of a stagnant company's low-priced stock and then aggressively promote that stock as a good buy. If that effort results in a rising price although the inherent value of the company may not have changed at all , the seller may realize big gains in his holdings.

This tactic is sometimes called "pump and dump," and a buyer should be alert for such activity. An inflated stock price can result in large losses for unsuspecting investors. Rising prices can also fall and leave a buyer with nothing. Research a company thoroughly before investing.

Be wary of telemarketers, e-mailers, newsletters, and other advertisements touting "hot" stocks or "secret" tips. Open an account with an online brokerage service. Buying penny stocks without a live broker means using an online, no-frills service. Sites like E-Trade and TD Ameritrade will let you set up an account with a small deposit for making purchases and paying fees.

These sites work well for penny stock investing, because they permit constant monitoring of what may prove to be volatile price movements. Learn the mechanics and risks of buying penny stocks, and then begin trading. Using limit orders will allow you to control the price of your transactions.

Using market orders may lead to purchasing stock at inflated prices or selling it too low, because many buyers and sellers will post unrealistic bid or ask prices. Look for solid stocks at good prices. If a company is touted as a big winner, but its stock is offered at a very low price, it may be a "pump and dump" stock. A "pump and dump" stock is a fraudulent stock that will not yield any real money for you, as the investor. Keep consistent tabs on your stock's price.

Successful penny-stock traders will often spend all day in front of their computer, making frequent trades at a moment's notice. Unlike in a casino, however, the trader won't know the odds of winning before putting in his money, and of course there is no way to predict luck.

If you spend enough time reviewing, researching, and watching your stock, you will start to see patterns and may be able to predict when it's time to buy or sell. Remember that penny stocks are not reliable, long-term investments. Don't use them in your retirement portfolio. It's very difficult consistently to accumulate wealth from penny stocks.

They're better suited for short-term speculative plays.

Policies differ from one broker to the next. Some brokers would accept an initial order that small although they might expect a larger opening deposit. Not Helpful 2 Helpful Not Helpful 0 Helpful 4.

Not Helpful 3 Helpful How do I find an online broker who's not going to rip me off? Compare online brokers by visiting NerdWallet. Well known discount brokers are not going to rip you off. Not Helpful 4 Helpful Is there a time limit on how long one can hold stock before they have to pay out of it as a loss?

How to Buy Penny Stocks Without a Broker: 10 Steps (with Pictures)

You will never have to pay out. If the price goes down, you simply fail to get some of your money back when you sell. Not Helpful 3 Helpful 5. Are there penny stocks that give dividends? Would it be a bad strategy to just sit back and get paid dividends if a company is doing well? A few penny stocks do pay dividends, but small companies are more likely to use their profits for capitalizing themselves. With penny stock you're more likely to profit from selling appreciated shares than waiting for dividends.

Not Helpful 0 Helpful 1. How long may I hold onto a penny stock? As long as you like. Trade it as you would any other stock. Not Helpful 0 Helpful 0.

What if I want to invest in medical marijuana stock? If you can find a publicly-traded company that engages in that business, most stockbrokers could help you trade in those shares. Not Helpful 35 Helpful How small can an online brokerage deposit be? Some online brokers let you open an account without a deposit at all. Not Helpful 18 Helpful Sign up with an online broker account that will allow you to add money to your account via bank transfer, wire, and check deposits.

Not Helpful 20 Helpful What Brokers allow you to buy stocks whose shares are below a penny? Answer this question Flag as What app can I use to buy penny stocks? Already answered Not a question Bad question Other. If this question or a similar one is answered twice in this section, please click here to let us know. Things You'll Need Computer.

Edit Related wikiHows WH. Financial Stocks In other languages: Thanks to all authors for creating a page that has been read , times. Did this article help you? Cookies make wikiHow better. By continuing to use our site, you agree to our cookie policy. Reader Success Stories Share yours! PN Patty Norr May 2. I am new at investing. The article has shown where and how to start and what to look for.

This is the best quick information I have found. Thank you so much. AK Azizah Kane Feb 6. I was able to get a lot of tips and vocabulary that I wasn't familiar with. AR Akinyemi Raji Jan But with this article, I am well informed with all I needed to start trading penny stock. DA Danish Ansari Aug 29, EA Eric Anderson May I'm pleased to find something that was simple to understand to a slow person with no experience. JK Jen Kaye Smith Dec 31, Juan Cisneros May IS Iris Suer Mar VS Vaishnauv Pranesh Surajbally May 31, This is much better compared to everything else on the Internet.

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