How to trade penny stocks

© Magical Art Penny STocks
© Magical Art
What are penny stocks
What are penny stocks? By definition penny stocks are stocks that trade between $0.0001 to $1.00. A sub-penny stock is any stock that trades between $0.0001 to $0.01.

There are 10,753 stocks that trade as penny stocks. So how are these stocks traded? These stocks are bought and sold over the counter (OTC) or by means of the quotation service, which includes the well known Pink Sheets and the OTC bulletin boards.

On a daily basis several million dollars of these stocks are traded; just think of the amount of stocks that is. OTC stocks simply put are companies that wanted to openly trade their shares, but could not meet the listing qualifications of the major markets like NYSE or NASDAQ.
How to trade penny stocks
Penny stocks are traded just like every other stock. Pick a company that you want to use and then go into the trade section. Input the stock symbol and select limit order. Since these stocks cost less than a dollar you have to say how much you are willing to pay for the stock. Just because a stock says $0.0008 does not mean you have to pay that. Always look at the bid price and try to get close to that. People who trade penny stocks will do this on the short term such as day trading or just for a few days. Just like any stock you can easily trade these stocks online at your broker. But before you trade make sure you understand your commission fees. Some companies charge less for trading penny stocks compared to the normal fees that are charged. Investigate the fee before committing to purchasing penny stocks as this fee may affect the worthiness of the stock.
Investment risks with penny stocks
As with any investment there are risks involved in trading penny stocks. These risks can include extra fees for trading. But maybe more important is the fact that these companies don’t have the same filing requirements that big name companies do that trade on the NYSE and the NASDAQ. Sources: