How to Trade Penny Stocks

Penny stocks are traded in over-the-counter market and you have to use a broker to acquire shares of penny stock. The main thing that you need pay attention to is having enough money in your account to cover the cost of the share and broker’s commission.

But this does not answer the question — how to trade penny stocks?

The best way to trade penny stocks is checking the pink sheet website. To trade a stock, you have to know the ticker symbol of the stock and the market the stock is trading on. Where penny stocks are concerned, you should always buy shares in multiples of 1000 or you might have to pay you broker extra money in terms of commission fees.

You also need to inform your broker whether you order is a market order or a limit order. A market order refers to the fact that you are willing to pay the best available price for a share. In a limit order, you specify the price which you are willing to pay for a share of penny stock and you trade will be executed only if the share price reaches your price. You should try and trade using limit orders as it will increase the control you have over the transaction and you will also avoid price volatility.

Your broker also has to know the duration of your order. For instance, you order stands good for just the trading day or it may stand good until it expires on a day specified by you.

Now if you want to sell a penny stock, you have to follow the reverse process of buying. You have know how many share you have and you inform the broker that you want to sell so many shares of a stock in your account. You will have to give the broker the ticker symbol and where the stock is traded. In addition, you will have to specify the amount you want to sell the shares for and until when your order is good.