Interactive Brokers

How To Pick A Good Penny Stock Broker

Penny stocks are common stocks that have a price of less than $5 that are known to be speculative and are therefore traded over the counter (OTC) via obscure markets such as the Pink Sheets or the OTC Bulletin Board. In some cases, they are also defined as stocks with a price per share of lower than a dollar. They are also known as a micro cap equity, with a market cap that’s potentially lower than $50 million or even $25 million in some assessments.

Trading newbies may find penny stocks quite attractive as it takes very little investment capital to get started; but many new traders may not realize that their losses in such stocks can be magnified. Trading penny stocks is considered a very risky proposition, especially for novice traders, as there is a tendency of these stocks to experience greater volatility and larger value movement than blue chip stocks.

One way to battle the higher risks involved with trading penny stocks and increase your odds of becoming profitable in your trades is to shore up your learning and experience via a reputable penny stock broker. There may be penny stock brokers (or penny brokers) out there that can offer you support and guidance to enable you to sift through the thousands of junk stocks on the market and find that gem in the rough that will hopefully make you a little cash. Here are a few tips on finding a good penny stock broker:

• Experience and Reputation. There is nothing more important when it comes to trading any sort of investment on the open market, but especially when it comes to trading penny stocks. Penny stocks experience the same market movements and volatility as blue chip stocks, but to a greater degree. Knowing how to read the trends, conduct sufficient research, and complete an analysis is crucial to being successful in penny stock trading. Choose a broker that has the right environment for this type of trading.
• Cost. Regardless of what kind of investments you trade, be aware of the costs you incur. Look for a broker with reasonable fees. Commissions must be kept to a minimum in order to protect your profit margin. But, the lowest cost broker is not always the best choice, so don’t pick a broker based on the price alone.
• Customer Service. Whether you prefer to trade your stocks online, over the phone, or in person, your broker should be available to answer questions you may have about a particular trade, regardless of whether they are a online discount broker or a full service broker. Full service brokers should also be available to discuss trading strategies and offer sound advice when it comes to picking stocks. Good discount brokers also offer these types of services; however they will usually come in the form of online tools, educational articles and other learning materials instead of from a live person.

Penny stocks offer active investors a great opportunity to try their luck with making money via trading and stock market timing. Choosing the right broker can help provide a positive and profitable penny stock trading experience.