Posted on 24 August 2012.
Understanding where to trade penny stocks is one of the first steps toward success in this business. There are essentially two elements that you need to consider. First is the actual location in which you will trade penny stocks. The next is the broker through whom you will make your trades.
You cannot trade penny stocks on the regular stock exchanges. For the most part, these companies have not filed with the Securities and Exchange Commission (SEC) and are not under that body’s oversight. This means that you must look for these stocks in the over-the-counter (OTC) market. People also refer to these as pink sheet stocks.
It is important to understand that the OTC market does not provide any guarantees. When you trade on a major stock exchange, the SEC or another regulatory body essentially protects you against certain forms of fraud. They do not prevent you from losing money in a bad investment but they do make sure that you get the stocks for which you pay. In the OTC market, however, you are on your own and must use your wits to protect yourself from fraudulent traders.
Not every broker is willing to let its clients participate in penny stock trading. If you want to get into this type of investing, then you will have to find a broker who permits these trades. Carefully review the policies of a broker before using it to trade these stocks. Some of them charge high fees for each trade and these can significantly diminish returns. With a little experience, you will learn where to trade penny stocks and earn the most profits.
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