Stocks of value under $5 per share in the secondary market are called Penny stocks. A penny stock trader would consider these of low quality, since they’re of unknown companies and have high volatility. The trading account for a penny stock is opened in a similar way as the trading account for other stocks. Before opening a penny stock account for trading, do the following:
o Search for a good stockbroker. You can get your friends and acquaintances to help. You may also look up on the internet for brokers. Research well with your dimensions. If you see discount brokers, note them. Many full service broker firms are not interested in carrying on penny trades. Look for brokers who may provide you with low fees, fast execution of trades, convenient trading platforms. Alternatively, contact your bank to know if they provide penny stock trades. Or find out if the stockbroker of your choice carries on trades on the Over the Counter Bulletin Board. Most of the penny stock trades are carried out there.
o Make sure that your stock broker’s trading platform accommodates six digit ticket symbols because penny stocks are mostly tagged with extra letters to their ticket symbols. Only if you have the six digit ticket symbol can you do penny stock trading on the OTC-BB market. You will find trading impossible if your stockbrokers platform does not support the extra letters.
o Next consideration in the selection of a stockbroker is the fee composition. There are brokers who charge flat rate for all trades. Where the charge is on the quantity, the penny stock trader finds problem with the fees. Penny stocks are usually traded in large quantities, and if the fees composition charges you on quantity then you may end up paying a huge sum as commission.
o When you have found a suitable stockbroker, you open a trading account, and become a penny stock trader. Online solicitation requires you to complete their account form. There would be a minimum account balance to be maintained. This has to be paid heed to. There are brokers who charge you extra if your minimum balance falls short.
o You can fund your penny stock trading account through the usual money transfers of money orders, bank-to-bank deposits, wire transfers, and with your personal or business checks.
Start trading in penny stocks after the essentials like setting up of the account and fund balance have been ensured.