Penny stocks are low-priced stocks that are traded over the counter (OTC) as opposed to being traded over a major exchange. They are also called notice board stocks or pink sheet stocks. The term "penny stock" refers to the fact that these stocks are cheap, usually trading for less than £3 a share.
- Skill level:
Access your Etrade account, open a new order ticket and select the 'Stocks' tab. The process you go through to buy a penny stock is virtually identical to the process you go through to buy an exchange traded stock. Note, however, that you cannot place a market order because the markets for penny stocks are thinly traded.
Enter the symbol for the penny stock as well as the quantity of shares you intend to buy. Penny stock symbols are typically four or five letters long. Remember that you cannot place a market order. Instead, place a limit order and specify a buy price. The simplest method to use when placing a limit order is to enter the current quoted price of the penny stock as your buy price.
Review all of the information you entered before placing the order. If everything is correct, enter your order and wait to receive confirmation. These are the same steps you would take when buying an exchange traded stock.
Tips and warnings
- As an alternative to placing the order online, call 1-800-ETRADE-1 to get a current quote or place an order over the phone.
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