How to Trade & Buy Penny Stocks Online

Jun 5, 2012

In general, the stock market is divided into large cap, medium cap and small cap stocks. Large cap companies include industry titans like Apple, Exxon-Mobil and General Electric, and these companies are valued in excess of $10 billion. Medium cap stocks include stocks of companies worth $2 to $10 billion. Small cap stocks are generally from companies with a market capitalization of $2 billion to $300 million. Stocks below this level of market capitalization are generally known as "penny stocks." Many penny stocks are traded through the over-the-counter (OTC) market that includes Pink Sheets.

Penny stocks

Penny stocks can be a slightly challenging investment for the first-time investor. Keeping that in mind, here are a few tips for how to buy penny stocks online.

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Trading and Buying Penny Stocks Online

Trading and buying penny stocks online is no different than buying any other stock or most types of equities. If you already utilize the services of a brokerage like Charles Schwab, E*Trade, Scottrade, TD Ameritrade or any of the other large brokerage firms, you should be familiar with the process. Simply find the symbol that the penny stock trades under and indicate that you would like to purchase shares. Be sure to type in the amount of shares that you're planning on purchasing. One of the best things about penny stocks is that they're cheap, and you can load up on several hundreds of shares, if not thousands of shares. Many brokerage firms will give you options on the type of order you want to have filled. A market order is filled by the brokerage firm as they get it and at the price at which the stock you want to buy is currently trading. If you want to be a bit more selective as to what price you buy your stock at, you can set a limit order, a stop order or a stop/limit order in order to maximize your potential profits and minimize your potential losses.

Continuing your Education

Even though it's easy to get started and be trading penny stocks in no time, you'll always want to make sure to do your due diligence and understand the fundamentals of the companies in which you're investing. Learn all you can about penny stocks and have a good understanding of how to read cash flow statements, balance sheets and other financial documents.

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