Penny stocks are the home of brilliant traders and gamblers, honest entrepreneurs and scammers, honest value driven penny stock brokers and broker pond scum. The dichotomy of risk and reward are the greatest in the penny stock investments. The siren call of huge returns brings many investors who are looking for fast riches. Anytime there is a chance for get rich schemes there is someone trying to sell it to you.
Just because this niche draws some, shall I say, less than reputable types doesn’t mean you shouldn’t invest in it as there are great reasons for trading and investing in micro caps. If you’re looking to get into penny stocks you just need to learn how to pick your penny stock broker wisely.
How to Recognize A Bad Penny Stock Broker
The bad stock broker is generally unavailable for all questions except those that result in a commission. They have a phone service that requires you push 37 buttons before you talk to a live person and their online trading platform looks like it was made in another era.
These brokers aren’t necessarily scam artist they are simply bad business people. They believe the only way to make great money is only focus on the money. If you are unable to get trades in a timely matter than it doesn’t matter how much you are saving on commissions.
How to Recognize A Penny Stock Broker Scam
Some brokers choose to make their money at your expense instead of working for you. These brokers are paid commissions (often illegally) to push certain penny stocks.
As a rule a broker should not be making stock choices for you. If you give them criteria they should filter stocks for you with the access they have to good information and provide you with different angles to look at companies, but stock picking should not be part of their duties. If your broker aggressively recommends penny stocks odds are it’s in his interest not yours and you need to find a new broker.
Another giveaway that your broker may try to scam you is if they don’t offer the SEC required information sheet on penny stocks. This information page summarizes the risks of investing in penny stocks. It pretty much warns people that they probably shouldn’t invest in this area of the market and requires a signature from the investor and the broker. People who don’t understand penny stock investing (which are the perfect people for a scam) will often be scared away by these information sheets. If you aren’t offered this page you need to find a new broker. Maybe it was a honest mistake, but if it was the broker can just be extra sure he doesn’t forget with the next new client.
So What’s a Good Penny Stock Broker Like?
A good penny stock broker will provide an abundance of information on penny stocks including the risks and rewards of investing in this niche. Their conversations with you will always be balanced. Their job is to help you make decisions, not make decisions for you. If you feel like you’re in a commercial it’s not a good broker. They need the heart of a teacher.
They should also carry a state of the art online web portal. Almost no one calls their broker to make their orders anymore. The website or other computer access should be easy to use with lots of error proofing so you don’t accidentally order something you didn’t want.
Also, there is something to gain from picking a broker that specializes in penny stocks. The large brokers have tagged on penny stock investing to their list of services, but they certainly don’t focus on it. Usually, it’s just another commission with no change in service. Pick a specific penny stock broker like Trading Direct or LowTrades if you want services that specialize in this niche._____________________________________