How To Trade Penny Stocks - 7 Ways?

When you ask the question where do penny stocks trade, you will be provided with many answers.  Some answers are better than others because of lesser risk and greater reliability. Here are 7 ways you can trade penny stocks:

Straight from the Companies

You can buy directly from the company. On the surface this seems advantageous because you avoid broker commissions but the bigger disadvantage here is that you only have the company's word to go on. In the case of using a middleman they usually have more experience dealing with such companies so they might be able to save you from some bad trades. Tread carefully.

Over The Phone

If you have seen or heard of the movie 'Boiler room' you probably know what we're going to say. This is quite a dangerous place to buy penny stocks because a lot of scammers start out coldcalling for prospects. They use all sorts of pressure tactics to purchase stocks that could turn out to be bogus or poorly managed or fronts for illegal operations. These shares of stock are usually very easy to buy but near impossible to sell. We would recommend avoiding this route entirely.

NASDAQ SmallCap Market

For serious penny stock investors, the NASDAQ small capitalization market is the best place to be in.  The companies listed in this stock exchange are held to stringent reporting requirements as well as strict compliance with the listing policies, which means that investors have easy access to factual company information.  It is so popular and reliable that news services cover its shares just like they do the Big Board shares.

Over-The-Counter Bulletin Board (OTC-BB)

This is usually the first answer to the question of where do penny stocks trade for many people. The OTC-BB is where the stocks falling below the $1 requirement of the NASDAQ small cap market requirement are booted into.  Still, it is more reliable because a certain degree of control is still exerted over the companies listed.

American Stock Exchange (AMEX)

Although the ANEX boasts of lesser volume than that found at the NASDAQ SmallCap, you will still enjoy the benefits of excellent investor visibility, ease of buying and selling, and ease of accessing company information.  Indeed, you can start with the ANEX to gain experience before moving on to the NASDAQ SmallCap or even have investments in both exchanges.

Pink Sheets

If you have a thing for high-risk investments that may not pay off, then we suggest the Pink Sheets although with a grain of salt. There is absolutely no reporting requirements, no controls and no rules on many fronts.  Indeed, the Pink Sheets can plunge your bottom line into the red when you are not too careful.

Canadian Markets

If your online broker engages in over-the-border trades, then we highly recommend trading in Canadian stocks either through the Toronto Stock Exchange or the Canadian venture exchange.  The selections of good penny stocks are very large, meaning that there are good reporting requirements and good access to company information.  The brokerage fees, however, may be higher than those found in the United States so you have to take it into account.