For many beginner 澳洲幸运5官方开奖结果体彩网:investors, the first logical stop is 澳洲幸运5官方开奖结果体彩网:penny stocks. As the name suggests, penny stocks are those companies that trade with a low share price, often less than $1. It's understandable to see why rookies get hooked by the dream of buying into a company for only few cents and then selling for a substantial profit when the price trades back in the multi-dollar levels. The extremely low prices allow an investor to hold thousands of shares for a relatively small amount of 澳洲幸运5官方开奖结果体彩网:invested capital through 澳洲幸运5官方开奖结果体彩网:online brokers. With that scale, the gain of just a few cents per share can translate into big 🌺percentage returns (the reverse is also true, of course).

But here's a fair warning: Such stocks are generally considered to be highly speculative and high risk for several reasons: their lack of 澳洲幸运5官方开奖结果体彩网:liquidity, large 澳洲幸运5官方开奖结果体彩网:bid-ask spreads (how much the ask price exceeds the bid price for an asset), small 澳洲幸运5官方开奖结果体彩网:market capitalization, and limited following and disclosure.

🎶Still, if you feel you are ready to start trading penny stocks, 𒆙continue reading.

Understanding Penny Stocks

The 澳洲幸运5官方开奖结🌳果体彩网:Securities and Exchange Commission (SEC) defines a "penny stock" as a security issued by a small-cap or micro-cap company that has a market capitalization of less than $250 million. Others define penny stocks as those that trade at less than $5 per share (though some experts choose to adopt a lower cut-off value of $1 per share). They often have little or no financial history, or a bad one: The underlying company may be close to 澳洲幸运5官方开奖结果体彩网:bankruptcy. Think of them as the opposite of 澳洲幸运5官方开奖结果体彩网:blue-chip stocks, in short.

A penny stock usually trades off the major market 澳洲幸运5官方开奖结果体彩网:exchanges. That's because the big 澳洲幸运5官方开奖结果体彩网:stock exchanges, such as NYSE and Nasdaq, have 澳洲幸运5官方开奖结果体彩网:listing requirements for the companies trading on them. Nasdaq will delist a company's shares if it fails to maintain a minimum closing bid price of $1 per share following 180 days. As a result, people interested in trading penny stocks often turn to the 澳洲幸运5官方开奖结果体彩网:over-the-counter market (OTC). The 澳洲幸运5官方开奖结果体彩网:OTC Markets Group organizes securities into tiered marketplaces that reflect the integrity of the operations, level of disclosure, and degree of investor engagement.

Narrowing Down Trading Candidates

Now that you understand where to trade penny stocks, the next step is to determine what stock to trade. One popular method is to use 澳洲幸运5官方开奖结果体彩网:stock screening tools, such as the one found on the OTC Markets website or Finviz. Screening for stocks with a price under $1 is the easiest way to narrow down the trading universe. From here, you can filter the list down further depending on your strategy and risk tolerance. Maybe you are only interested in penny stocks that conduct business within the sector of 澳洲幸运5官方开奖结果体彩网:drug manufacturing, for example. In this case, you’d make the necessary adjustments aꦡnd then run the filter. 

Once you get the hang of using Finviz’s stock screener, your list, based on the filt🌟er above, should look something like this:

Source: Finviz.com | as of Sept. 11, 2021

Opening an Account

There are many factors to consider when opening a 澳洲幸运5官方开奖结果体彩网:trading account, such as ease of transferring funds, fees, and customer service. Brokers specialize in different areas, so take your time to shop around for one that will meet your needs. For penny stock investors, one aspect to pay particular attention to is the 澳洲幸运5官方开奖结果体彩网:fee structure. Some brokers charge 澳洲幸运5官方开奖结果体彩网:commissions on a 𝕴per-share basis. This structure is usua🌜lly set at a certain rate for an initial number of shares, and then another rate for each additional share.

A 澳洲幸运5官方开奖结果体彩网:per-share structure may be better suited for investors who are buying a relatively low number of shares and may not be the best for penny stock traders. It may prove more useful to 澳洲幸运5官方开奖结果体彩网:choose a broker that offers a relatively low flat rate per trade, regardless of how maꦯny shares are involved. The lower the flat rate, the less impact♕ that fees and commissions have on the final return.

Understanding the Risks

When it comes to trading penny stocks, it's extremely important to understand the risks involved. Since most 澳洲幸运5官方开奖结果体彩网:institutional investors, such as 澳洲幸运5官方开奖结果体彩网:mutual funds, 澳洲幸运5官方开奖结果体彩网:index funds and 澳洲幸运5官方开奖结果体彩网:money managers are prevented by charter from trading penny stocks, these equities generally lack a following in the investment community. Therefore, liquidity is a serious concern: It's not uncommon for 澳洲幸运5官方开奖结果体彩网:retail investors to get stuck in a position for several days or weeks until there is enough supply or demand to ente♐r or exit, experiencing serious price fluctuations along the way. With penny stocks, it is easier for traders to manipulate prices and make them look weak or strong.

The Bottom Line

When it comes to investing in penny stocks, tread with caution. In most cases, these companies are 澳洲幸运5官方开奖结果体彩网:small-cap stocks and are susceptible to major volatility. If you feel like you understand the risks and are ready to proceed, the first step is to find a broker, fund an account, and then find a suitable trading candidate. 澳洲幸运5官方开奖结果体彩网:Stock screeners are probably your best bet in narrowing down the universe o🤡f stocks so that you can find one that meets your trading style and risk tolerance.