You can find numerous trading platforms, brokers, and apps that make penny stock trading a piece of cake. If you want to fill your shopping cart with penny stocks, prepared to be spoiled for choice. The tricky part is finding shares that are worth buying. You must put your excitement of making a fortune overnight on the leash and do a keen background check on individual companies. It is also necessary to exercise patience and think twice when a deal sounds too good to be true.
Avenues for Finding Penny Stocks
Some of the trusted platforms you can use when buying penny stocks include Charles Schwab, TradeStation, Robinhood, E-Trade, and Interactive Brokers, just to mention a few. You, however, must proceed cautiously to distinguish legitimate penny stocks from pump and dump schemes that promote weak stocks from stagnant companies.
Finding where to purchase or sell penny stocks is the easy part. The heavy lifting begins when it’s time to evaluate prospective companies and separate the wheat from the chaff.
Due Diligence Checklist
You need reliable and timely information about a penny stock to predict its potential share price in the future. Sufficient research is the key to ensure that you’re trading successfully. In this case, you want to buy ownership in small companies that are possibly one lawsuit or one lost contract away from sinking. It is common sense practice to have some facts at your fingertips before money changes hands.
Check the Ticker Symbols
On any penny stock trading platform, each company is identified by distinct ticker symbols made of 1-5 letters. For instance, the ticker symbol for Wal-Mart is WMT. It is only in rare cases like when a company changes its name or merges with another corporation that their ticker symbol will change.
With so many companies trading in different markets, it is not rare to find stocks with almost similar ticker symbols. For instance, the symbol for Ford is (F). It is easy to mistake this with the ticker for Forward Industries (FORD). Always double-check these symbols to ensure you purchase shares from the specific company that you want.
Study Crucial Specifics About A Company
Before investing in any company, get to know its name and verify its unique identifier (ticker symbol). You should also request a stock quote from your brokerage company to find out the cost of each share. It is also essential to find information about the operational strength of a company based on its marketing strategies, branding, and recent profit patterns.
To get it right, do a fundamental analysis of a company. Review its management team success stories and even check out press releases to project the odds of a penny stock appreciating. An abstract review is also necessary because a lot hinges on the branding and marketing of a company, as well as the customer loyalty it enjoys.
Before drawing your conclusion lines, do a technical analysis to scrutinize stock price movements and the trading volume of a particular company. This will help you predict possible share price activity in the future and find stocks that pay dividends.