A stock trader, penny stock investor or discount stock trader is somebody or organization involved in trading common equity securities i.e. shares of stock issued by publicly traded corporations. Penny stock trading can be via a stock market or through a broker. Penny stocks are generally smaller cap stocks usually under $5.00 per share.
They are viewed as being lower risk trades and hence offer more profit potential. This is why more investors are attracted towards them. Some of the advantages that they offer include; they can be easily purchased and sold, there is a lesser amount of paperwork compared to other forms of transactions, there is less or even no minimum investment and they offer higher frequency as well as more profitable returns. They are preferred by newer investors as they do not require too much money and are easy to invest in compared to other forms of investing.
Penny stocks are preferred by investors because they offer high liquidity, but at the same time, they come with higher risks. The biggest advantage for investors is that they can buy and sell them as and when required. They are also very flexible as compared to other investments. The biggest disadvantage for investors is that they incur higher brokerage fee along with the purchase of these securities, thereby reducing the profit that the investor earns.
Penny stock trading, like any other form of trading, requires expertise and practice. One needs to have complete knowledge of the technical and fundamental analysis of the particular market. To become a successful penny stock trader, one needs to possess analytical and communicative skills. These can only be enhanced through active trading. There is no doubt that many people earn a considerable amount of profit through active trading, but it also has some disadvantages too.
Penny stocks can be traded on many exchanges including over the counter or OTC markets. However, there are only two basic exchanges where these trades occur-the New York Stock Exchange and the NASDAQ. There are many lesser known exchanges where these stocks can be traded. These two basic exchanges include the Pink Sheet and the Over the Counter Bulletin Board.
Penny stocks can be bought and sold for a few cents each. However, it requires a lot of experience for investors to gain maximum profit out of this option. It is advisable to start small when trading these stocks. A minimum of five percent of the total share value should be owned by an investor to start trading. If the investor finds his trading business lucrative and he wants to expand his trading business, then he can increase his share trading size.
The pink sheet is a renowned stock trading company based in New York city. It is one of the first organizations in the world to use an electronic quotation system for quotation of stocks. It uses pink sheets as their quote base and provides information on listed and unlisted companies. Due to its popularity and fast movement, pink sheets offer the most convenient and cheapest stock trading services in the world.
Online trading is a great way of trading. This is because it allows active traders to trade without dealing with other brokers or with other traders. There are also a large number of online stock trading companies where trading can be done. However, it is better for investors to stick to the established companies for best results.
Another popular option that investors can choose for trading stocks is through mutual funds. Mutual funds are groups of stocks that are bought and sold on a regular basis. Although investors can buy shares directly from the issuer, this option can sometimes result in higher costs. It is therefore better for investors to invest in mutual funds by dealing in regular shares. This is because investors get lower commissions and other profit adding factors when they deal in this manner.
Stock brokers in India are meant for providing assistance to investors in trading. They provide services ranging from selling stocks to buying new stocks. It is easier to browse hundreds of stock brokers on the internet. However, investors need to do some research before selecting any particular broker. To begin with, investors should compare the services offered by each of the stock brokers to arrive at the most suitable choice.
There are many types of exchanges where stocks are traded. Investors can choose an exchange depending on their choice and circumstances. For instance, indexed stocks, derivatives, and foreign exchange-traded stocks can be traded online and investors need to have a minimum price protection and trading accounts with registered investment brokers in order to execute trades.