How to buy and sell penny stocks online

Written by bradley james bryant
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How to buy and sell penny stocks online
Penny Stocks No Sure Bet (freedigitalphotos.net)

When you're ready to buy stocks online, all you need is an online brokerage and information regarding your trade and stock. If you have this, then you're ready to submit a buy order. When you're done, your order will return a trade receipt with the number of shares purchased, the purchase price, date and exchange traded. Low-priced stocks (penny stocks) trade on over-the-counter exchanges. Due to the low price and value, they are usually lacking in trade volume. This lack of liquidity is the primary challenge in trying to buy or sell penny stocks.

Skill level:
Moderate

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Instructions

  1. 1

    Understand where to trade penny stocks. Penny stocks are traded on the Over The Counter Bulletin Board (OTCBB) and the Pink Sheets. These exchanges do not have the same rigorous federal requirements as the New York Stock Exchange.

  2. 2

    Understand what you're buying or selling. A penny stock is either a new business or a business in (or close to) bankruptcy. While these stocks are inexpensive, and the payoff can be great, they are also very risky investments.

  3. 3

    Gather data. You will need the ticker symbol of your stock, the number of shares you want to trade, the price you want to pay and the number of days you would like to hold the trade outstanding ("good until" date).

  4. 4

    Contact an online broker. If you already have a broker, ask him about trading penny stocks on the OTC or Pink Sheets. If you don't already have a broker, ask for references and request a link to the online application. Most brokerage houses have online registration.

  5. 5

    Submit your order to an online broker. You will be asked to fund your account before you can place a buy or sell order. An example of an order is "Please purchase (or sell) 5,000 shares of ABC Penny Stock at 35 cents or less. The stock is on the OTC (Over the Counter) Exchange listed as ABCP. Keep the order open until filled." This is all the information you gathered in Step 3.

  6. 6

    Monitor closely. Penny stocks are one of the riskiest asset classes. There are some good deals, but do your research and track your positions.

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