Penny Stock Brokers & The Basics of Penny Stock Investing

Penny stock investing can be very lucrative and thus many investors are always looking for profitable penny stocks to buy for maximum gains. Low priced micro cap stocks provide traders with the opportunity for huge gains while starting with a small investment. Many large companies began as low priced penny stocks and made fortunes for their early investors. However, because you are often dealing with companies that are new or not yet profitable, investing in low priced stocks has many risks to go along with its potential rewards.  Whether low or high priced, it is certainly more about knowing how to play the stock market and finding good stocks to invest in and great performing companies over anything else.

A penny stock, as defined by the Securities and Exchange Commission (SEC) is any stock selling for under $5 a share. Some online penny stock brokers may also define a penny stock as one trading under $3 per share or even $1 per share. No matter which definition you use however, a penny stock is essentially a very low priced security. The low price of these offerings provides an opportunity for the average investor to control a large amount of shares with a small investment.

Penny stocks are not typically listed on the New York Stock Exchange (NYSE). They are usually listed on the Over the Counter Bulletin Board (OTC), or the Pink Sheets, but can also be found on the NASDAQ and other exchanges. Information on these companies is usually scarce and may be unreliable. You may find information on the Internet but it is often little more than promotional material released by the company or some stock guru. Start with a good body of knowledge like the buy penny stocks guide, then do your own due diligence and find out as much information as you are able about the company, its products, its clients, its market, and the fundamentals of its finances.

When buying stocks like penny stocks, always remember that these stocks are cheap for a reason. The company may be new or perhaps experienced recent financial difficulties. Most of these stocks will not turn out to be big winners; in fact, most will never rise above their penny stock status and may eventually fail. However, the possibility that a few stocks may see 100%, or even 1000% gains does exist, and that is the seductive lure of penny stock investing.  If you focus on working with the best online stock broker you can and being the best investor you can be in the long run, you investments will be sure to pay off.  Whatever you do – follow your own rules and personal investment guide – a plan of action is always better than no plan when it comes to any kind of investing.

For something more stable to trade – check out ETFs (Exchange-Traded Funds) like inverse ETFs and financial ETFs.  If you’re interested in stock option trading, you may want to acquire some stock option software to help you in your day trading.