Jan 162011
The world of penny stocks can be a daunting place for a newbie which can certainly make you feel highly vulnerable and exposed to a high level of risk, especially at the beginning of your journey into the world of penny stocks. The thing to understand about penny stocks is that often the profit made from any given transaction might be only a few dollars here and there, but the idea is to add up the profits from many transactions traded on an intraday basis in order to come up with significant profits. The other way to earn money with penny stocks is to get involved in the so-called micro-pennies, which allow you to buy literally tens or even hundreds of thousands of shares for less than $1000. Then, if the company takes off and goes to even just one dollar a share you could be an instant millionaire.
Of course one of the most important decisions you’ll need to make as you venture into penny stocks is which penny stock broker you will use, and whether you will use the online penny stock brokers or one of the traditional off-line brokers. If you’re dealing with large blue-chip stocks, mutual funds, bonds, or any of the other more traditional investment vehicles, sticking with large investment houses and banks is usually the way to go. The world of penny stocks however tends to be much less regulated and the Internet has opened up a wonderful and yet sometimes dangerous world of new style financial institutions that deal on the Internet only. These include online penny stock brokers as well as Forex brokers. While most of the penny stock brokers online are generally legitimate, you do want to check for a few red flags on their website. Make sure that a physical address and phone number is listed and that it’s possible to call them. Also make sure that they are registered with the federal securities exchange commission and that their registration numbers are clearly listed.
Once you have determined a list of legitimate online penny stock brokers you will need to choose the best penny stock brokers. For this decision you will be looking at key factors such as commissions, spreads, and order execution time to choose the best penny stock online brokers. Commissions refer to what percent of the transaction price the broker takes as their profit. Spreads are the difference between the bid and ask price of the stock. The wider the spread, the more money the broker is taking in the middle and the harder it can be to make a quick buck off of slight variations in stock price. Finally, order execution speed can be critical in the high-stakes world of day trading where the difference between a few seconds and a few minutes might make all the difference between capturing a quick price fluctuation and losing out.