If you’ve ever thought of investing as a personal business, then you are not alone. Many people have left their jobs to start trading penny stocks at home for profits and an income. Penny stocks trade for less than $1.00 per share on stock quotation systems such as the Over The Counter Bulletin Board (otcbb.com) and OTC Markets (otcmarkets.com).
According to Timothy Sykes, you must trade large blocks to make a profit. And, that is where the fun begins.
Open an Account
You want to find a broker that specializes in penny stocks, or, at least meets your needs. Then, determine how they make their money–whether they charge commissions on a per-share basis. Some brokers may sell at a rate for the first set of shares then sell at another rate for every additional share.
With regard to penny stocks, it helps to find a broker that offers a low flat rate for any number of shares. With a lower flat rate, you can get a better return on your investment.
Don’t Go Too Low
You don’t want to invest in an unknown, four-employee company. If you find a penny stock listed between $1 and $5, then there is some stability and hopefully a good-sized workforce.
You don’t want to invest in a company that will fold after one week. So, research the company before investing. Also, you must remember that you can’t trust just anyone. Companies want their stock prices to increase so that they can stay in business.
Many penny stocks are scams. Don’t take what companies say about their stock as fact. You must perform your own research and do your homework so that you don’t get burned.
Figure Out Which Stock to Trade
You can start with stock screening tools to search for stocks under a specified price range, such as $5. You can then create additional filters depending on your tolerance for risk.
Maybe you want to invest in a sector such as oil and gas. You can’t trade penny stocks on the NYSE or Nasdaq. These stock exchanges have special listing requirements of a minimum bid price of at least $1 per share.
With the OTC Market, you can find securities organized into tiered marketplaces that show the level of investor engagement.
Start Small
If you’re new to penny stock investing, then start with a small amount. If you can make that investment grow, then you can add it to your principal. You don’t want to lose your shirt in the process. If you keep adding money, and you keep losing, then you will soon be out of funds.
This is where it becomes very important to control your emotions. You need to limit your fear and greed. You must get past those emotions to make thoughtful trading decisions.
In Conclusion
Penny stock investing is not for everyone. Yet, you can become successful if you do your research and spend only what you can afford. If you get really good at it, you might even do this full time.