Saturday, June 26th, 2010
Investors popularly choose a penny stock, which is also called a micro cap stock, globally. It makes an investor vulnerable to a very high risk of losing money because the penny stock is illiquid. A trader who is familiar with penny stocks can get very high returns. Before an investor can think of where to buy penny stocks, he or she must understand what they really are. Some people find themselves buying stocks they do not know anything about.
A penny stock is normally any stock, which is worth $5 or less money. Although this not a standard definition, a penny stock is often cheap. These stocks are very volatile meaning that their prices will keep going up or down. Prospective investors planning to buy penny stocks soon should really know where to buy them. Even before buying, the following two requirements are important:
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* Set aside starting trading capital: There is not a single business that does not require starting capital. Penny stocks are cheap and anyone can buy some. However, a potential trader must have capital. The sum should be beyond the amount investors would require to survive in the markets. Be careful when estimating the capital for trading. Starters may lack an idea about this explain why it’s necessary for them to find and read relevant tips on the Web.
* Select a stockbroker: A penny stockbroker is very important when a person is just a beginner. There is simply too much to learn about the market. Stockbrokers are experts. They know exactly where to buy the penny stocks. They also have valuable tips about picking profitable stocks all the times. The first thing to do when selecting a broker is to use the Internet to find reputable services. Some brokerage firms are completely reliable and others are not. Gather several options and select the best broker among them. Some of the best types are discount brokers. Many of them offer legal business and they value quality services. Prospective traders are better off working with a full service broker. Many of them have best quality services and they offer advice.
Once the trading capital and the stockbrokers are ready, where to find penny stocks is next. There are two common sources of penny stocks. One is the Over the Counter market. This type of a market is equivalent to the New York Stock Exchange. The key quotations offered at the OTC are pink sheets. In the sheets, one can find listings of companies offering penny stocks to trade on a daily basis. The other option is the Over the Counter Bulletin Board.
An investor only have to use these sources to find the penny stocks he or she could buy. Once a stock is found, an investor should then tell the broker about it. The broker’s role is help the traders execute the orders they want to. Sometimes where to buy penny stocks depend on the country. For instance, Canadian penny stocks are open for USA residents as well. To buy these types of stocks, a trader should go to Toronto Stock Exchange and TSX Venture Exchange markets.