Buying Penny Stocks

If you have defined stock share prospects and have decided on buying penny stocks, you may have wondered how to start. Or where? Have no fears though. The basic process of stock trading is relatively easy, whether you’re looking at buying penny stocks of a company you have heard from a friend or a hot tip you read from an online source.

Open a Brokerage Account

Choose a broker to open a brokerage account. Find a brokerage firm based on your needs and goals. If you want professional advice, you should choose a full service brokerage though it’s a bit expensive. If you're confident and self-assured of your stock picking skills, you may just try an online brokerage, which you can reach through the internet and the phone. Simply request an application. You might also be required to send check or wire money in order to open you new brokerage account.

Find the Ticker Symbol of Your Penny Stocks

If you have done extensive research and have researched the sites of companies that have caught your eye, then the next thing you need to do is to find its ticker symbol. For example if you want to buy a share of Homeland Security Corp., its ticker symbol from the stock board would be 'HSCC'.

What's the Market the Penny Stock is Trading

Lets' say you've wanted to buy HSCC, note that the stock is trading in NASDAQ Small Cap.

How Many Shares Do You Want to Buy

Decide the volume or the number of shares you want to buy. If you have opened $1,500 in your account at your chosen brokerage firm, determine how much you would want to spend on HSCC. If you decide that you would only want to shell out $300 on this stock and its recent trading price is $1.5 per share, then you would want to place an order of 200 shares before commissions ($300 / $ 1.5 = 200 shares).

Review the Type of Trade Orders

Choose if you want the market price or limit price. If you have no idea of how much you will pay for the shares, choose the market price or the best procurable price available when your order is entered on the trading floor.

Alternatively, you can prefer to set the limit price. This means you're willing to purchase the penny stock at a determined limit order. In our example, you can set the limit price of HSCC at $1.5 or less. However, this type of order has no assurance of being filled or executed. In other words, you may get the stock at a lesser price, but you won’t get it if the stock price goes higher than $1.5.

What's the Duration of Your Order

If you have chosen market price when you place your order, it does not require duration since you're willing to take the best price available on the market floor.
Orders for limit price require duration though. If you want to buy 200 shares of HSCC and you set the duration for three days, additional brokerage commissions may be added every day until the order is filled. You should call for a 'Day Order' if you want to save commission costs and you only want the order to be good for one day.

The duration can be set up to the number of days or weeks as you choose.

Monitor Your Open Orders

Unless your order expires, it would remain open until the duration that you have set (if any). You should be able to monitor the shares that you have purchased and the total cost that you paid. If you called for a 'day order' and you got 100 shares, say of HSCC, you should cancel the rest of the 100 shares to avoid the commission that will add up in the next trading day.

Buying penny stocks should be easy enough for you as soon as you open a brokerage account. Just remember not to bet your whole ranch if you’re only just starting in the stock market.