Online Penny Stock Trading

Finally a site dedicated to providing quality information on Online Penny Stock Trading rather than trying to sell you scams.

With Online Penny Stock Trading, we will take a serious and professional look at the business of trading penny stocks online. We will not promote stock picks or sell products related to the penny stock market. We will examine and present the cold hard facts and provide leads to legitimate established brokers and references.

Online penny stock trading is not a means to “get rich quick” and involves both serious work and serious risk. Please see the following index for help in navigating this page. Each section will be more thoroughly explored with its own page.

• What Is Penny Stock Trading?
• How To Trade Penny Stocks
• Where to Buy Penny Stocks – Penny Stock Brokers
• Penny Stock Fraud and Stock Promotion
• Stock Trading Software

What Is Penny Stock Trading

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Penny stocks are issued over-the-counter (OTC) through institutions such as the OTCBB (over-the-counter bulletin board) and the Pink Sheets. These are common stocks which lack market capitalization. Sometimes they’re brand new, but sometimes they’ve been de-listed from the stock exchanges.

Some people think penny stocks are traded thinly, however share volumes often exchange in the several hundred million range daily. Because of these millions of exchanges and low prices, the stock is often manipulated by organized promotion (or to put it simply, hype). This can be difficult to combat as often it is difficult to find verifiable information on penny stock companies.

Sometimes it is not the company itself that participates in this promotional manipulation but traders attempting to exploit the market through its volatility.

In the U.S. markets, the specific label “penny stock” refers, in a general sense, to stocks traded beyond the major stock exchanges (NYSE or NASDAQ).

But technically, the SEC (Securities and Exchange Commission) defines a penny stock (or micro cap stock) as a speculative low value certificate for a small company, regardless of its market capitalization and regardless of its being traded on NASDAQ or the New York Stock Exchange.

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How To Trade Penny Stocks

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In this section we will provide a brief summary of the actual penny stock trading process. While it isn’t that difficult from a technical standpoint, you should evaluate a number of variables before you begin throwing your money into the delicate process.

For more details and some specific caution, please visit my full article on this topic: How To Trade Penny Stocks.

Trading penny stocks boils down to the following process:

1. Research the entire market and practice online paper trading before you even consider proceeding.
2. Open a stock trading account with an online stock broker. Please read more in my penny stock broker article: Penny Stock Brokers.
3. Familiarize yourself with your broker’s specific conditions and terms, particularly their transaction fees.
4. Connect your bank account with your broker’s account. This can take a few days. I suggest keeping a separate bank account which you use for strictly your penny stock trading.

Once you’re technically setup, you’ll need the following data to execute your penny stock trades:

• Where does the stock trade? (NYSE? Pink Sheets? OTCBB?)
• What is the penny stock’s ticker symbol?
• The volume (the exact amount) of penny stock shares you desire to buy
• In most cases you can save on fees by trading penny stock shares in multiples of one thousand.
• Define your specific purchasing price.
• IMPORTANT: Define your expiration date. This is how long you wish to hold your order open, or the last closing date on which you would accept this exact trade stock, price and volume.

In the opposite direction, you’ll use essentially the same penny stock data and same process while executing a penny stock trading limit order.

Again, for more details on this process please read my full article on How To Trade Penny Stocks.

Where to Buy Penny Stocks – Penny Stock Brokers

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It is very important for you to purchase your penny stock through your established micro cap stock broker. As you delve into the world of penny stock trading, you will discover organizations and services who offer to both pick your stocks and buy your stocks for you. IMPORTANT: Steer very clear of these kinds of services.

Again, please see my article on penny stock trading brokers for more detail, but you should generally find yourself trading penny stocks with familiar names and always trade from your established online trading brokerage account. I also suggest reading an overview on how to consider different brokers in this Penny Stock Trading article: Where to Buy Penny Stocks

Some common, trustworthy names you’ll come across include Vanguard, Charles Schwab, Fidelity, Scottrade, Sharebuilder, TD Ameritrade, Zecco, E*Trade. There are plenty of others of course, but these are the most established and trustworthy of the online penny stock brokers. For more on this matter, see my new review: Penny Stock Brokers

Yes, some of these major stock brokerages are more expensive then some advertised services out there. But remember, we’re talking real money here, and there are plenty of scammers ready and willing to exploit the foolish and naive. So stick with well-known, reliable online stock brokers.

Penny Stock Fraud and Stock Promotion

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In another article, I will go into much greater detail on the various known penny stock fraud schemes. But for now here are the most common penny stock fraud schemes: Pump and Dumpp, Chop Stock, Biased Recommendations (or Sponsored Picks… your friendly neighborhood “penny stock newsletter” probably engages in sponsored picks), and Offshore Brokers.

Before you abide by any advice provided to you, be sure the provider of this advice isn’t associated with any of these known penny stock manipulation schemes. For more on this financially delicate matter read my evolving penny stock fraud article.

Stock Trading Software

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Penny stock trading software provides the essential tools you’ll require to research penny stocks, collect vital data and execute microcap stock trades. In some cases you may find application packages which also help you manage your brokerage accounts.

There are generally two flavors of stock trading software: all-in-one packages try to cover every possible functionality and specialized packages which focus on a single component and fulfill that purpose entirely.

Component software is usually more focused and more potent while complete packages often lack versatility and appeal to more casual traders.

In many cases these days, you can rely on your established penny stock broker to provide you with the services and software you need. However, if you plan to day trade penny stocks, especially aggressively, you may need to invest in some specialized applications.

Charting software is a common component application utilized by day traders to create a graphical representation of the data to assist them in making snappy decisions.

I hope this page has given you a strong overview of online penny stock trading. If you’ve really read this far, congratulations. You’re well on your way to learning the art and science of online penny stock trading.

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Penny stocks are risky, but that doesn’t mean you shouldn’t have any in your investment accounts. There are certain stock screens you can use to help weed out bad penny stocks. These tips should be used as part of your initial screening process along with other technical and fundamental screens to pick your list of acceptable penny stocks. Keep in mind these screens won’t be as useful once you have already invested in a stock, but they may save you some heartache upfront. [...]

Continue Reading: Red Flags to Watch For When Evaluating Penny Stocks

Stocks are simply a piece of the pie — a small piece of a corporation. They can be purchased individually from a person who owns the stock or they can be purchased from a market or exchange. In this sense all stocks are the same. Where the term penny stocks comes in and how they are different from what most people think of as stock is the level of safety.

With only so many resources available the Security Exchanges Commission (SEC) can only audit a certain portion of companies every year. While the companies wishing to be on a major exchange pay for their own independent audits as part of being on the exchange, smaller companies do not. [...]

Continue Reading: How Penny Stocks Are Different from Other Stocks

The penny stock pump and dump scheme is the longest running pink sheet scheme still in practice today, but it is difficult to control because of the way it works. Since the barrier to day trading has been reduced by advances in computers and internet availability more people are becoming addicted to trading stocks and making money in this market. The newcomers to day trading are often more susceptible to manipulation because they are often following technical trading patterns laid out in books, but even more experienced traders can get caught up in these schemes.

Here’s how the penny stock scheme works: [...]

Continue Reading: The Life Of The Penny Stock Pump And Dump

There are a lot of different stock trading strategies meant to help you find greater success; one of them is stock channeling. Channeling can be a valuable tool that will help you make the most of market trends by helping you set specific points where you will both buy and sell shares. It can also help you set a stop-loss to help prevent you from losing too much on a certain stock.

Not all stocks or equity use this technique. To use this you need to look for stocks that have a channel in their chart. There are a couple of ways to do this. You can go through charts to find this channel pattern, you can use software that finds the patterns or you can subscribe to a service that will give you a list of stocks on which you can use this technique.

Finding channeling stocks is the first step, but you also need to know how to read the channel. [...]

Continue Reading: Channeling Stocks – A Brief Overview