Penny stocks are stocks that trade for under £3 (or $5 in the US) per share in the open market. Stock market traders consider them low quality stocks. Smaller, unknown companies issue them and penny stocks are volatile. Opening a trading account to trade penny stocks is no different from opening accounts to trade other stocks in the stock market. Here is how to open an account to trade penny stocks.
Log onto the Internet and research stockbrokers. Pay attention to discount stockbrokers. Many full service stock brokerage houses don’t support penny stock trades. Look for discount brokers with low fees, fast execution times, easy to use trading platform, and good customer support. Contact your bank to see if they support penny stock trades. Verify that the stockbroker you choose supports trades on the Over The Counter Bulletin Board (OTC-BB) market. This is where most penny shares trade.
Confirm that your stockbroker’s platform supports six digit ticker symbols. Most penny stocks have extra letters attached to their ticker symbols (for example MAMY-BB) to indicate they trade on the OTC-BB market but some trading platforms don’t support the extra letters. You will have problems buying and selling many penny stocks if your stockbroker’s platform does not support the extra letters.
Consider the stockbroker’s fee structure. Because penny stocks trade for low prices, most traders buy large quantities at a time. This is a problem if your stockbroker charges fees and commissions based on the number of shares. Look for stockbrokers that charge flat fees on all trades.
Open a trading account when you find a stockbroker that meets your requirement. Log onto their website and complete their account form. Pay attention to the minimum account balance requirement. Some stockbrokers charge fees if your account balance falls below their minimum.
Fund your penny stock trading account. Most stockbrokers and banks accept funding through money orders, bank-to-bank deposits, wire transfers and personal or business checks.
Begin trading penny stocks when your account set-up and funding is complete.
Things you need
- Internet access