January 10, 2013 By admin

You will be surprised how easy it is to start investing in penny stocks. You should start out paper trading before risking your own hard earned money. This is a vital component which can be the key to your success. By paper trading you start to become more comfortable with  the basics of investing. You will gradually develop your own trading style and test out strategies,  you may feel more comfortable buying stocks rather than short-selling. Paper trading should last at least 6 months, then the fun can begin!

1. To buy shares this requires you to open an account with an online discount broker, such as etrade.com. Choose a broker who is authorized to buy and sell penny shares. You can apply by filling out an application.

2. Once accepted you then can deposit money into your online brokerage account.  When you want to buy a stock, you can order  your shares online through your brokerage account. Nowadays brokerage commissions are a lot smaller. The average commission charged is around $10.  The SEC allows no more than 2.5 percent on each transaction Online brokerages are inexpensive and you can setup your account in a matter of days as most brokers have decent customer support.

3.  Each broker has different account minimums ranging from $500 to $20,000. Most brokers all have a common sliding commission scale. For example if you have a $1,000 account you will be charged a higher commission rate than a person who has $20,000 in his account. Fund the account with money you can afford to lose (if possible, but not its not always realistic).

4. Invest a small amount at the beginning and if you can grow this amount significantly, it would be wise to increase your account size. If youre unable to grow your account dont continue to pump more and more money into your account. Go back to paper trading which can help regain your confidence and help you save your capital.

5. Learn all the basic stock market terms. It is imperative that you understand the spread, which is the difference between the bid price and the offer price. The bid price is the value one broker-dealer is willing to buy the stock, the offer price is the value one broker will sell it for another. For example if stock XYZ has a bid of $1.00 and an offer of $1.10 it would have a spread of $0.10. For a trader to make money, your bid must rise above the spread, plus dont forget to take into account the commissions charged on that trade.

6. Stay disciplined, dont let emotions dictate your stock trades and cause you to move away from your trading strategy. In order to be successful at stock trading you will need to control your emotions and greed to maximize you chances of success. You will soon find out that trading isnt easy. Its a common knowledge that 90% of traders lose money consistently.