Are you interested in trading? Are you still a new learner, and you don’t want to put a lot of money on it? Are you looking for some penny stocks to watch? You may have heard of penny stocks, and you may want to try investing in them. But, what are those, exactly? So, you need to understand everything about it beforehand before you decide to put your investment in penny stocks.
Penny stocks are the low-priced, small-cap stocks which typically come from the small public companies. Initially, they will trade a low price per share, probably in less than $5 per share. Thus, some penny stocks do not trade on Nasdaq, New York Stock Exchange (NYSE), or other major market exchanges. You can find most of the penny stocks trade through the electronic over the counter (OTC) Bulletin Board. You may also find them in the privately-owned Pink Sheets.
A lot of companies that offer penny stocks on the marketplace are usually a growing company that still has limited money and resources. If you are a trader that dares to tolerate the risks and have a great liberality about it, the penny stocks may be suitable for you. In other words, trading in penny stocks may give you an enormous gain. However, going in there will also put you at a significant risk of losing your investment in a big amount just during a short period.
Investing in penny stocks: risks and disadvantages
Since The stocks are commonly associated with small companies, it may be difficult for you to find a ready buyer in the marketplace. You also need to understand that it is also possible for them to have a lack of liquidity and infrequently trades. The penny stocks often have poor reporting standards, including their listing fees, requirements, and regulations. Therefore, you may find some difficulties in selling your penny stock shares once you have them. Moreover, it will be very challenging for investors to find an accurate price. In general, the stocks are considered as stocks with highly speculative, where you, as one of the investors, could lose a significant amount of their investment. Which, as the unfortunate truth, most of the investors are experiencing the loss.
The stocks are risky markets that often have a lot of low-quality companies. It may also be possible that the industry is dying and has a numerous amount of better competitors. The trading volume in penny stocks is often fragile, compared to the larger companies that can trade over millions of shares per day. Therefore, you have to be ready to face reality whenever something goes out of your control.
Obviously, we can not separate penny stocks with lies, scams, and pump and dumps. There are a lot of tricking tools used by some frauds to fool investors. If you really want to start trading penny stocks, you really need to be sure about it and believe that you have enough knowledge before trying it. Some fake promoters often create a misleading statement that makes their companies seem legit. They even make a fancy website for their counterfeit companies to attract investors. As the investors buy their sales, they push the price higher. This makes the promoter getting more money, while the buyers lost their investment.
The bright side of penny stocks
After reading all of the downsides about penny stocks, you may begin to wonder why are there a lot of people that still want to invest their money there? How some of those can have a success story, then? Can we even try to avoid the deprivation?
The most crucial thing in penny stocks is finding the right stock. Once you are able to see which penny stocks to watch, you may have more confidence to go ahead. There are thousands of people in the world that still believe in luck. There is nothing wrong with trying to put your small investment and hoping that it will jump ten times or fifty times higher within a couple of weeks. And that has happened to a lot of them. If you know the trick, this luck might happen to you, too.
Even if most of the companies in the stocks are still small, many excellent companies still trade for pennies. These companies have a stable financial position and proven management team. They often dominate the industry with their outstanding products and services. Moreover, there are also a lot of small companies in the United States and other developed countries that are starting to grow more prominent and more successful. These companies often have a growing market share and are improving their financial ratios. If you can find this company, you can trust them with your investment.
Another advantage of penny stocks is that you can purchase a lot of shares in the penny stocks that you are interested in. For example, if you have $1,000 or $500 to trade, you may only be able to buy less than five shares from a more prominent company. But, with that same amount of money, you can purchase hundreds or even thousands of shares from the penny stocks. In this case, you may feel okay that even if some of them do not benefit you, you still can get advantages from the other. That also means that penny stocks could be an excellent start for a new investor or someone with a smaller amount of money.
Some of the companies in penny stocks sometimes make their quick movement in the marketplace. Typically, these companies move their high prices in days. Thus, you do not need to wait for years to earn more money than you invested. During your investment in penny stocks, you may also find that it is fascinating to wait for the significant gains or even losses that you may get from penny stocks.
How to purchase penny stocks?
With all your newly-gained knowledge, you might be wondering how to purchase penny stocks, and where to find penny stock market list. To answer that question, we will uncover how to start your penny stock trading step by step. Now, read carefully and make sure you don’t miss a single point about what we gonna tell you.
• Step 1: Find Your Penny Stocks
Same with other types of stocks that are sold in the stock market, you can find penny stocks in major stock exchanges such as NYSE and Nasdaq. However, to maintain its credibility, these major stock exchanges don’t sell all kinds of penny stocks, and only list some of the penny stocks that meet their minimum requirements. For instance, Nasdaq has the rule to maintain the minimum stock price for at least $1 per share, and failing to do so will result in being delisted from the Nasdaq stock market. As a result, the majority of the stocks are traded through the over-the-counter bulletin board (OTCBB) and the Pink Sheets. Different from major stock exchanges such as the New York Stock Exchange (NYSE) and Nasdaq, investing through OTCBB and Pink Sheets bear more risks due to the lack of minimum requirements for a company to list their stocks, which make it a good target for the scammer to hunt their prey.
Generally, penny stocks that were listed in OTCBB hold more legitimacy than those being listed in the Pink Sheets. This happens because OTCBB maintains some minimum requirements for the company to list its stock, while the Pink Sheets don’t have any listing requirements at all. Another drawback that Pink Sheets bears is they are not registered in the U.S. Securities and Exchange Commission (SEC), which means that their whole transactions are not monitored by the government. Those conditions make finding reliable the stocks are generally harder than it is in another stock types. To overcome this, you need to do extensive research regarding the backgrounds, activities, and annual reports of the company that offers penny stocks, which you consider to buy. When you’ve done your research, try to study the stock price movement of these companies to determine the best time to invest. Another thing that you need to keep in mind before buying your penny stocks is don’t buy a lot of shares at one time; start by buying a small number of shares to make sure that it is reliable.
• Step 2: Select Your Broker
When you make up your mind regarding what penny stocks you’d like to invest in, the next thing that you need to do is selecting your stockbroker. To put it simply, a stockbroker is a middleman between you and the company who sells their stocks. You can find these services from brokerage firms that consist of a lot of stockbroker professionals. In exchange for their services, a stockbroker usually charges a commission fee for every transaction that they handle. The amount of commission fee for each transaction could differ from one stock broker to another, depending on the brokerage firm they employed to. Besides being the middleman in your transaction, a stockbroker could also give you financial advice regarding the stocks that you want to invest. These services could be really helpful, especially for those who are new to stock trading.
There is one crucial thing that you need to pay close attention to when selecting your broker, it is the fee structure. Some of the brokers charge their services based on the number of shares that you sell or buy in a transaction. While this commission is relatively small when you buy a normal stock, but it makes a significant impact if you buy penny stocks because every penny that you spend matters. Try to find brokers that charge relatively low and flat rates per transaction. To help you find your perfect penny stockbroker, we’ve got you a list of regulated penny stockbrokers in the U.S:
This penny stock broker offers penny stocks from OTCBB and Pink Sheet markets. They divided their penny stocks into three categories, which are Stock Plan-A, Stock Plan-B, and Other Stock. If you buy penny stocks from stock Plan-A, your transaction will be free of charge. On the other hand, if you buy your stocks from Stock Plan-B, your transaction will be a subject of $5 charges for every transaction. For stocks that fall into other categories, they charge a flat rate of $7 per transaction. If your shares in one stock are exceeding 10,000 shares, they charge an additional $0.0007 per share. This stockbroker is registered and monitored by the SEC. Apart from that, ChoiceTrade also a member of several investment organizations such as NYSE Arca, the BATS exchange, and the Securities Investor Protection Corporation.
• Charles Schwab Corp:
Charles Schwab Corporation offers penny stocks from its standard stock trading accounts. They offer both penny stocks from OTCBB and Pink Sheets from their online trading websites and mobile app. This penny stock broker charges $4.95 per transaction made through them.
• Interactive Brokers (IB):
Interactive Brokers offer penny stocks from both OTCBB and Pink Sheets through its standard equity account. The fee structure for this stockbroker is divided into two categories, fixed-rate and tiered rate. Fixed rates are eligible for a minimum of $100 transaction, with commission starting from $0.005 per share. On the other hand, tiered rates are eligible for the transaction that exceeding 100 million volume per month, with rates starting from $0.005 per share.
Scottrade offers stocks with a low commission fee, only about $6.95 per transaction. In addition, they also charge 0.5% for the trading principal for stocks that valued under $1 per share. This stockbroker also provides research and screening tools for their customers, which could help customers to make better decisions regarding their penny stock trading. The materials that Scottrade provides include real-time quotes, cutting-edge stock screeners, the latest market news, market commentary, and reports from an analyst.
• TD Ameritrade (AMTD):
TD Ameritrade offers both penny stocks from OTCBB and Pink Sheets. The stocks could be traded by using standard equity and trading accounts that TD Ameritrade offers. This stockbroker charges $6.95 per transaction made from its platform.
• Step 3: Choose Your Trading Platform
In the old-time, when you want to buy a stock from the stock market, you are required to call the broker, and the prices of the stocks might changes significantly by the time your order being placed. However, thanks to the advancements of our technologies, a large portion of stockbrokers today offer their service from the internet through online trading websites and mobile apps. This internet-based trading is basically a self-service, where you see the prices of the stocks in real-time and buy it whenever you want. While trading through mobile apps seems more modern and obstacle-free, but it poses a higher security risk due to hacking and scamming. It is your choice, whether trading through a phone call, online websites, or mobile apps, since most of the brokerage firms offer all of these options. If you worry about the risk of hacking, you might want to use a phone call as your trading platform. However, if you believe that your stockbroker sites or mobile apps have a good immunity through hacking, those internet-based trading is obviously a good deal to consider.
If you made it through this section, you might be wondering for penny stock hot list or trending penny stocks today. Well, no need to worry about it because we’ve compiled the best penny stock picks in December 2019 for you, which hopefully will help you find great penny stocks to buy. Here are the best penny stocks to watch that we compiled from the top 20 penny stocks list:
• Almaden Minerals Ltd. (AAU)
Almaden Minerals Ltd. or known as AAU in penny stock markets, is a Canadian gold mining company that recently appears to set a triple bottom pattern, a pattern where three equal laws are followed by a breakout that happens above the resistance level, which is $0.43 in this case. Learning by experience, this pattern would be a start for a radical change where the prices will climb high above the resistance level. It is expected that this stock would reach $0.75 to $0.80 shortly, which will increase its value by 74%. If the stock not reaching $0.43 in a few days, it means that this triple bottom pattern has failed, and you should sell your shares before it’s too late.
• Geron Corporation (GERN)
Geron Corporation is a biopharmaceutical company that supports the development of a telomerase inhibitor known as Imetelstat in the clinical stage. Recently, their stock shown a hammer pattern followed by Doji candlestick, which implies an expected rise in the near future. If the stock price successfully exceeds its resistance level at $1.60, it is expected that it will continue to rise further.
• Paratek Pharmaceuticals, Inc. (PRTK)
Paratek Pharmaceuticals, Inc. is a biopharmaceutical company focused on clinical-stage development and commercialization of tetracycline-based therapeutics. The stock prices of this company currently fall to 61% from its 52-week high. Currently, its stock valued only about $3.00 per share. However, it showed a triple bottom pattern, which could be a sign of a significant rise in the near future.