Learn Where To Buy Penny Stocks Online In 3 Easy Steps

So, you've decided to buy penny stocks? That's great. Small-cap or penny stock investing can be very lucrative one you have the right pieces of the puzzle in place. Let's get started:

First, do you have the money? Let's get one thing straight first. You should only invest any money that is left over after you have saved enough for a rainy day fund. You should set aside enough money to pay for 6 months of expenses in case you need to deal with the unexpected. I hate to act all preachy but trading in small-cap stocks is ideal only when you don't need the money in the short-term. Investing in these can be a wild ride. The prices are very volatile and you can make huge profits or losses in fairly quickly. Provided you gain some experience and get the hang of things, you will be able to maximize your profits and minimize your losses.

Second, have you picked a broker? You will need to decide whether you need a full-service or a discount broker. Your choice will depend on your answers to a couple of questions (1) how much money you have to invest (2) how frequently you expect to be trading (3) how much help you need from the broker itself (4) how comfortable are you with online trading? This isn't intended to overwhelm you. In fact, knowing the answers to these questions will get you closer to picking the ideal broker for your needs. Let's run through a few scenarios.

Scenario A - You have less than $2000 to invest: If you are just starting out, you will probably be placing less than 30 trades in a month. Your best bet would be go for a discount broker with lower commissions, low or no inactivity fees, and an account minimum balance above the total amount you are willing to invest.

Scenario B - You have between $2000-$10,000 to invest: If you are a novice investor similar to the one in Scenario A, you should also be looking for the similar discount broker. The advantage you have is that your funds should cover the minimum balance requirements for most discount brokerages.

Scenario C - You have more than $10,000 to invest: More money more problems? Maybe not. You are in a comfortable position to choose between a discount and full-service broker since you have a significant portfolio and you could be seeking professional advice before making the trades. While we don't think that is necessary, you should keep your options open. If you are comfortable calling the shots and subscribe to an alerts newsletter or have your own source of information, you could use a discount broker too. Whatever you decide, at the end of the day your profits do get affected by the commissions you pay your broker. Choose wisely.

Third, have you picked the right penny stocks? Ok, you have the money set aside and have picked your broker. It's time to build a list of penny stocks for further research. These stocks trade in the OTC or Over-the-Counter market. The stock quotations are published on the pink sheets online and in a paper format. Your broker should also have access to this information. There are a a couple of reliable sources that provide penny stock alerts or subscriptions (for a fee). Whenever you hear about these sources, do your due diligence (fancy investing phrase for 'research'). Get your hands on as much company financial information as possible, learn to do some technical analysis i.e. read the charts. This might seem intimidating at first. But, you'll get the hang of this provided you put in the hard work. Penny stock investing is challenging, fun and most importantly lucrative when you have the right knowledge combined with experience.