Q:

How do you trade penny stocks online?

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Quick Answer

Trade penny stocks online by researching reputable online brokerage firms that facilitate trading of penny stocks. Choose a brokerage firm and open an account. Deposit a desired amount of money into the account to begin trading. TD Ameritrade is among several online brokerage companies that allow customers to buy and sell penny stocks through its over-the-counter bulletin board. Penny stocks are risky investments, and good investment decisions require thoroughly researching companies listed on pink sheets.

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Full Answer

Penny stocks are unregulated, but investors can improve odds of avoiding bad stocks by reading stock investment warnings issued by the U.S. Securities and Exchange Commission. Visit the SEC website and use its search tool to find information about the company issuing the penny stock. If the company has a problematic history related to investments, the SEC might report on it. OTC Markets provides ratings information related to how transparent companies are with investor information. If companies selling penny stocks share limited to no information, this raises a red flag for investors.

Penny stock traders must be wary of pumping schemes, which trick investors into buying penny stocks based on artificial popularity. Pumping schemes solely benefit unscrupulous penny stock promoters who sell their shares to earn profits after driving prices higher. Many companies selling penny stocks lack strong financial backing, unlike company stocks traded at major stock exchanges.

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