Facts And Myths About Penny Stock Brokers

Posted on 19. May, 2011 by GuestPoster in Stocks

Fact or myth:  In order to trade penny stocks, I need to find a special stock broker who only works with penny stocks.

This is a myth.  Your normal broker is the same one to assist you in trading penny stocks.   Online penny stock brokers are the same as normal stock brokers.  E*trade, Ameritrade, Zecco, Tradeking, Trademonster, etc., are all penny stock brokers.  The difference between penny stocks and other stocks is related the regulating body that they report to and the exchange that they are traded on.  Penny stocks are called Over-The-Counter (OTC) securities or pink sheets because they are not listed on a large exchange like the New York Stock Exchange or the NASDAQ.  There is less regulation for OTCs and therefore a higher amount of risk.  They are high return investments because there is less transparency and less regulation.  Securities are inherently risky investments and penny stocks are especially risky.

Fact or myth:  Penny stock brokers charge more for trading penny stocks.

It really depends on the broker.  E*Trade’s standard fees apply, however, many penny stock trades end up as broker assisted trades and when you call in, they charge more.  Scottrade charges a small fee for securities trading at less than a dollar.  The fee is 0.5% of the principal value.  Other online penny stock brokers will find ways to charge additional fees.

Fact or myth:  It is easy to make money trading penny stocks.

Myth.  It’s easy to spend money trying to make money trading penny stocks but actually getting to the point where you consistently find winners is a different matter altogether.  It takes a lot of experience and a lot of luck. Even if you spend money to subscribe to a penny stock newsletter, you are still involved in a high risk investment.  Penny stocks are inherently risky and there is no magic formula.  Due diligence takes time and effort.  Many penny stock newsletters will claim that you will see returns of 600% or more, but down in the fine print they’ll remind you that you are just as likely to lose everything that you invest.
If you want to make money trading penny stocks, start by finding an online penny stock broker and then begin researching penny stocks.  Read a few newsletters, taking them with a huge grain of salt, and then start following the stocks online.  There are opportunities out there, but you need to carefully sort out the losers.

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Tags: make money trading penny stocks, online penny stock brokers