Penny stocks (also called micro-cap stocks) describe shares of a company that trade for low amounts. These stocks usually between $0.01 to $2.00.
Penny stocks sound cheap, and are cheap, so new investors are often ready to leap in. The risk seems to be as low as the price. But the greatest gains in penny stocks grow over years, not days. Only the most patient investors will reap the rewards of this small investment.
Start with our guide to check out our top penny stocks and learn how to invest today.
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What is a Penny Stock?
Many institutions consider a penny stock to be anything that trades for less than $5.00 per share.
Despite their price, penny stocks equal a bigger risk than regular stocks. The reason for inflated risk is simple. The companies that hold penny stock typically have no profits and minimal operations. They usually trade on the pink sheets or on FINRA’s over-the-counter bulletin board (OTCBB). They are not required to file with the Securities and Exchange Commission (SEC).
These stocks have low liquidity due to a lack of buyers and sellers, so orders may not be filled right away or even at all. In addition, volatility tends to be high among OTC stocks, and bid-ask spreads are frequently large.
People tend to be lured into penny stocks due to their cheap cost and the simple math of this type of stocks. That is, if you buy shares for $0.20, and if the stock goes up by $0.10, then your profit is at 50%. However, it’s just as easy, and likely, for your $0.20 share to go down by $0.10 and lose 50%.
Therefore, a $1,000 investment could lose value pretty quickly.
How to Invest in Penny Stocks
Okay, you’ve listened to the warnings, yet you still want to trade penny stocks. Now, it’s still possible to trade penny stocks successfully. However, 1st, you need to learn. Then, you trade.
You must be an educated investor who understands the market to successfully trade penny stocks. If you trade penny stocks successfully, they really can offer the greatest risk-reward ratio of any investment type.
The 2nd thing you must do is stay away from scammers. Read the fine print on any email or ad you see on social media and in emails. “Pennies to dollars instantly” is a great lead-in to a major source of pain—for you.
Step 1: Do your research
Make sure the penny stock companies you’re interested in are legitimate. Do your due diligence and look into companies before throwing a few hundred dollars at their cheap shares.
You can go to the Securities and Exchange Commission (SEC) website to see if the stock has been recently delisted from a major exchange. You can also get copies of the company’s most recent SEC filing to get an idea of the company’s overall financial health.
It’s important to understand how the company makes money. A stock screener can help you filter stocks based on criteria like price per share. From there, you can dig into a company more individually. Research does require additional time, but it increases your odds of success.
Step 2: Choose a broker
A little research online will net you quick results on which brokers are the best for penny stock aficionados. A bunch of online brokers charge extra for penny stock trades, which makes penny stocks mega-expensive.
You’ll want to find the best penny stock brokers who don’t include extra surcharges on these types of. A couple of brokerages that surfaced were TD Ameritrade and TradeStation, which charge nothing in surcharges. Per penny stock transaction, TD Ameritrade charges $6.95 and TradeStation charges $5.
It’s also worth it to know that TD Ameritrade doesn’t have a surcharge on large orders—around 1,000 shares or more. Watch out, a lot of brokers enact a surcharge on those large orders. In addition, some also require you to trade penny stocks by imposing limits on the types of trades you can execute
Step 3: Determine which stock to trade
A good starting point is to use tools that exist on the OTC Markets website or Finviz. Also, know that the OTC Markets Group organizes securities into tiered marketplaces that can help you determine which stocks to trade—which may help you determine potential success with your trades.
Step 4: Begin trading
Be sure you’re comfortable with losing money on some (or potentially all) of your trades.
Step 5: Join a day trading chatroom
You’ll be able to learn a ton in a day trading chatroom. Even better, get a mentor who really knows a lot about trading the stock market. Be comfortable making mistakes. Nobody is a great trader right away.
A great overview of pennystocking can be found at www.timothysykes.com. (If you’re into penny stocks, you’ve heard of Tim Sykes, who, by the age of 21, turned $12,415 of his bar mitzvah money into $1.65 million by day trading penny stocks.)
A List of Penny Stocks
Take a look at our list of penny stocks—both gainers and losers. Both tables update continually, so you can stay up-to-date on the best penny stocks.
Buy EXPR Stock – Trade Penny Stocks
Buy ATOS Stock – Trade Penny Stocks
Buy SNMP Stock – Trade Penny Stocks
Sanchez Midstream Partners LP Common Stock
Buy ANY Stock – Trade Penny Stocks
Buy VYNE Stock – Trade Penny Stocks
Buy KIQ Stock – Trade Penny Stocks
Kelso Technologies Inc Ordinary Shares
Buy PSTV Stock – Trade Penny Stocks
Buy SENS Stock – Trade Penny Stocks
Senseonics Holdings, Inc. Common Stock
Buy VTNR Stock – Trade Penny Stocks
Buy ACRX Stock – Trade Penny Stocks
Buy AMC Stock – Trade Penny Stocks
Buy CHEK Stock – Trade Penny Stocks
Buy CHS Stock – Trade Penny Stocks
Buy SHIP Stock – Trade Penny Stocks
Seanergy Maritime Hldgs
Buy NVIV Stock – Trade Penny Stocks
InVivo Therapeutics Hldg
Buy TRCH Stock – Trade Penny Stocks
Torchlight Energy Res
Buy ITP Stock – Trade Penny Stocks
IT Tech Packaging, Inc. Common Stock
Buy IFMK Stock – Trade Penny Stocks
Buy SNDE Stock – Trade Penny Stocks
Buy TELL Stock – Trade Penny Stocks
Buy XELA Stock – Trade Penny Stocks
Buy CETXP Stock – Trade Penny Stocks
Buy MKD Stock – Trade Penny Stocks
Buy GEN Stock – Trade Penny Stocks
Buy NAKD Stock – Trade Penny Stocks
Naked Brand Group
Buy MOTS Stock – Trade Penny Stocks
Motus GI Hldgs
Buy HGSH Stock – Trade Penny Stocks
China HGS Real Estate
Buy SGRP Stock – Trade Penny Stocks
Buy NXTD Stock – Trade Penny Stocks
Buy NVFY Stock – Trade Penny Stocks
Buy MYT Stock – Trade Penny Stocks
Buy PFMT Stock – Trade Penny Stocks
Buy SNDL Stock – Trade Penny Stocks
Buy TENX Stock – Trade Penny Stocks
Buy DARE Stock – Trade Penny Stocks
Buy AIRI Stock – Trade Penny Stocks
Air Industries Group Common Stock
Buy MHLD Stock – Trade Penny Stocks
Buy TLGT Stock – Trade Penny Stocks
Buy AVGR Stock – Trade Penny Stocks
Buy FORD Stock – Trade Penny Stocks
Take the Risk
Tim Sykes has been asked the question, “Aren’t penny stocks dangerous?” He answers, “Yes. And life is dangerous.”
Ultimately, educated and disciplined individuals can make money on penny stocks—but it takes training, a mentor and a major willingness to take on risk. Get started with your research and our list of the best penny stocks today.
Ready to start trading penny stocks? Check out the best penny stocks you can invest in right now.
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