Penny Stock Brokers

The penny stock market is hotter than ever and knowing which penny stocks to watch is imperative if you want to stay ahead of the game. As with all types of stocks, investing right before a stock takes off will earn you the greatest returns. While it may be impossible to predict with certainty which stocks will be successful in the coming year, careful observation will give you a greater understanding of a stock’s movements as well as an understanding of general market trends. Penny stocks are known for their volatility. The more you watch the market, however, the better informed your decisions will be. With that in mind, here are a few penny stocks that show promise. Watching these would be well worth your time.

1. Gold

When it comes to penny stocks, gold is an old stand-by. Known as one of the most consistent OTC investments, gold is considered by many investors to be a sure thing. It is generally the most stable precious metal on the market and it is often said that in times of economic distress, your money is safer in gold than it is in the bank. It is this consistency, however, that makes many investors reluctant to buy gold penny stocks. Because gold does not experience the same high and low extremes as many penny stocks, the returns tend to be smaller and harder to predict. The risk also tends to be lower.

This is not to say, however, that gold is not one of the penny stocks to watch. In fact, gold prices have been on the rise for most of the last year and there is no indication that this trend will slow any time soon. The recent foreclosure scandals involving several of the major banks have prompted many people to reconsider how they save their money. As they reconsider, many are choosing to put their money into gold. Added to this trend is gold’s continued popularity with jewelers. This fall, the fashion runways were alight with gold accessories. While these styles are not set to hit the streets until spring, gold is currently experiencing a high demand from designers and manufacturers. This demand, and gold prices, are expected to rise even higher as the year continues.

2. Coffee

While coffee may have seen a bit of a decrease in popularity over the last few years, stocks are expected to explode in the near future. While a general rise in commodity prices is partly responsible, there are a number of reasons that coffee is one of the top penny stocks on the market. Many of the major coffee chains have experienced slow sales on account of the economic recession. On the surface, this does not look good for coffee investment. In reality, however, the slowdown of major coffee stocks has left the market open for many of the smaller manufacturers. Consumers who are no longer willing to pay $5 for a cup of gourmet coffee are more than willing to buy gourmet beans from specialty roasters at a fraction of the cost per cup. This is resulting in an explosion of smaller coffee producers. New plantations are opening and new roasters are springing up in cities across the country. As rising oil prices push transportation costs higher, coffee prices are set to skyrocket in the coming year. Whether you are a caffeine lover or not, there is no doubt that coffee is one of the top penny stocks to watch.

3. Technology

Over the last three decades, tech penny stocks have proven themselves to be consistent money generators for investors. Two main areas of technology should be looked at if you are investing in tech stocks. The first area is mobile technology. Major companies such as Apple and Google have had overwhelming success with their smart phones and tablet computers. An increasing number of similar, less expensive alternatives are set to flood the market in the coming year. While it is doubtful that these alternatives will overtake any of the products they are imitating, they are expected to do quite well and are worth more than a passing glance from investors.

Medical technology should also be considered by smart investors. Even in a slow economy, medical research continues to be well-funded. Many of the top tech companies specialize in research equipment or build components that are used in microscopes, lasers or pharmaceutical manufacturing equipment. This equipment plays an important role as scientists discover new and better ways to treat everything from acne to diabetes to cancer. As new treatments are developed, the demand for medical technology is growing at a faster rate than ever. New treatments require new equipment and many of the companies that build this equipment are selling penny stocks at only a few dollars per share. This makes medical tech stocks some of the top penny stocks to watch in the coming year.

Know Your Penny Stocks: Where to Find More Information

Regardless of which stocks you invest in, keeping track of the market is an important part of making informed investment decisions. While this list of stocks is a good jumping off point, it should not be used to replace your own research or your own common sense. Companies are required to provide very little information about their stocks when they list them on the pink sheets, making it difficult to tell which stocks are reliable and which are not. There are a few places you can look for more information on individual stocks before you invest. Company websites, for example, can tell you a bit about a company’s financial history. Reading online forums can also be a great way to learn about a company’s public image. Regardless of the quality of their products, a company that ranks low in public perception will probably suffer on the market. There are also a number of excellent books and websites available that provide details on the investment process and how penny stocks work. The SEC offers numerous tips on their website for avoiding penny stock scams. With solid research and a list of penny stocks to watch, you may see large returns much sooner than you think.

Not every company can be a Microsoft or a Starbucks and have a stock price that goes through the roof in the course of only a few years.  Every business had to start from humble origins and a modest value in order to work their way up on to the NASDAQ 500.  Companies that are taken public are automatically capable of having the public buy and sell shares in their operation, but the vast majority of publicly-traded stocks are lower in value than the corporate titans.  The process of purchasing or selling off stocks that have a value of less than one dollar per share is often called penny stock trading, also known as “micro cap stock trading”.  These are not definite terms but can be used for a whole host of stock price values.

The term “penny” has to do with the price of one individual share of stock in a company given that the value is less than one dollar.  While you cannot purchase an individual share with the change in your pocket, these lower-price investment opportunities give certain market analysts the advantage of buying low (sometimes very low) in the hopes of one day selling high and gaining a significant increase on their initial purchase.  As such, the penny stock trading world has countless finance experts looking and looking for the next small company to hit it big and join the ranks of behemoth stock traders like Amazon, McDonald’s, and so on.  The lure of penny stocks, thus, is similar to the lure of penny slots at a casino: even if the odds suggest that a favorable return is unlikely, it is very hard to overcome the temptation over a bottom-barrel price tag investment.

While the potential for dozens or even hundreds of times your rate of return makes penny stock trading a popular venture for professional as well as amateur speculators, there are a number of risks that detract from the experience.  While so-called “blue chip” stocks have shown to be a significantly safer bet (though by no means a guarantee), penny stocks have a high degree of uncertainty.  This makes mainstream banks, brokers, and capital management companies rather dubious about purchasing stock in penny trading.

One of the first major risks that can sink the prospect of a penny stock is the minimal contact that a small company has with the outside world.  When we think about giant corporations like General Motors or British Petroleum, we think about their public relations departments that are constantly working to give information out to the public on their upcoming projects, goals, managers, and operations.  These companies thrive upon the price increases that can occur in their stock when the slightest whiff of good news sends the price climbing (the reverse, of course, is equally true).  A company that is classified as penny stock trading, however, may not have the luxury of hordes of lawyers and media managers with which to manipulate their public appearances.  Furthermore, they may choose not to release select information about their operations, which can cause speculation to run rampant or cease altogether.  A third-party investor may have difficulty accessing the corporate records, as the “pink sheet” filings that all penny stock trading falls under does not need to be recorded with the Securities and Exchange Commission.  Finding a good and credible source for the investment news you would like, let alone the news itself, can be a mammoth task for penny stock trading.

A second concern about penny stock trading is that these companies do not have baseline standards that they must fulfill in order to retain their spot on the exchange listings.  While the large companies that form the Dow Jones Industrial Average must retain their place by having a certain stock price or a certain liquid value, penny stocks can fly under the radar by evading these protocols.  You often hear each fiscal year about the under-the-weather companies that are struggling to maintain revenue and are downgraded from the major exchanges; as the penny stocks never make their way to a major exchange in the first place they do not need to concern themselves with this standardization.  Furthermore, the Security and Exchange Commission does not have as much oversight as it does on the Fortune 500 company listings.  If minimum standards are a major concern for investors who are wary about putting their money on the line in an economy that has proven unpredictable, then penny stock trading can be a dubious venture.

As the vast majority of penny stock companies are new endeavors that have just gone public, they do not have a fiscal past to analyze.  Private companies do not need to worry about providing information on their histories and can simply destroy any data that is not necessary for records or taxes; an investor may not know simple things about a penny stock company because that information is not available.  These companies, furthermore, have not developed a trend for management, procedure, or innovation.  Do you know what they would do if presented with an opportunity, or is the entire experience novel?  The minimal amount of information can trip up the predictions about the stock’s performance.

Finally, some penny stock trading companies have difficulty raising capital.  In the case that a corporate entity has poor liquidity, the very real threat of being stuck with their shares of stock can present itself.  When you purchase any stock, penny or otherwise, you have to be sure that it will be attractive to the next buyer once you intend to sell it off.  If a penny stock company does not have the funds needed to continue development, you may have to drop the price of your shares considerably to find a buyer.  There is also a risk that investment in penny stock trading will lead to “pump and dump” manipulation, in which a buyer will pawn off shares at inflated prices, leaving the next owner of these shares with nothing more than overpriced pieces of paper for their trouble.

It is important to compare penny stock brokers before you begin trading penny stocks. Many people start into this area of trading and focus only on the incredible financial possibilities that these quirky, unnoticed stocks offer to independent traders. However, due to the way many brokers handle fees, especially in regard to penny stocks, it is possible to make the right trades and still lose money because of the way your broker handles the trade. Even if you do not lose money, you may not make enough to make it worth the effort. There are some brokers, however, who do offer better deals when it comes to trading in these low-priced equities.

Several of the brokers that permit trading in penny stocks try to deter clients from trading them. They do this because they make more money on their larger, active accounts and find these stocks to be a nuisance. Besides heaping fees on these low-cost trades, they can also apply a large-order surcharge whenever you buy more than 10,000 or 100,000 shares. This charge will rarely affect people buying shares in larger, more established companies. However, even a $1,000 position in a penny stock could easily put you over the lower limit and let your broker hit you with fees that eat up your returns.

In addition, each broker has its own rates in trades that make them worth comparing. Besides commissions, they may charge inactivity fees and have different requirements for minimum deposits. There is no perfect choice of broker for trading in penny stocks. Finding the right penny stock brokers depends on exactly how much trading you will be doing and how much you can afford to invest.

ETrade

This online broker charges commissions between eight and 10 dollars, depending on whether you are trading stocks or options. They do not charge an inactivity fee, nor do they apply special fees to low-priced trades. Since the minimum funding is just $500, this company is the choice of many independent traders who are starting out and do not have as much cash with which to play around.  They let you make up to 500 free trades during your first sixty days with them if you open an account with a minimum balance of $2,000.

Choice Trade

These penny stock brokers only charge five dollars for commissions and do not apply inactivity fees to any of their accounts. However, their minimum funding level is $2,000 and they charge an extra one percent on orders for trades in penny stocks that surpass 500,000 shares. If you do sign up with them, however, they offer some bonuses and free services for a limited time after your first trade.

Thinkorswim

At thinkorswim they offer a lot of unique tools and great customer service via their online platform. Commissions are just ten dollars and they offer as many as 3 complimentary trades in mutual funds every month. The greatest drawback to trading with thinkorswim is their high minimum deposit of $3,500. They are expensive compared to most of their competitors. Ameritrade recently acquired them. This may make thinkorswim more competitive in the near future and penny stock traders should keep their eye on this company.

Fidelity

This is another one of the pricey penny stock brokers. Fidelity requires minimum funding of $2,500. However, they do not apply any fees to penny stock trades and their commissions are just under eight dollars.

Schwab

This is another big name among penny stock brokers. Their commissions are decent at nine dollars. They do not charge fees due to inactivity and their required minimum funding is a manageable $1,000. However, they do limit penny stock trades to less than a million shares, which is better than applying a fee but can still cause some distress for traders looking to really take advantage of a great penny stock deal.

Sogo Trade

This is a smaller competitor among penny stock brokers but it offers some screaming deals. Their commissions fee is just three dollars. They do not charge for inactivity and the required minimum deposit is just $500. However, there is a low-price stock fee with these brokers. Stocks valued at under one dollar per share suffer a trade commission of one-half percent, with the minimum charge at three dollars. As good as the rest of it looks, this additional fee merits some consideration before you choose them over another broker.

Options House

These penny stock brokers have some great offers to entice you to give them your business. Their commissions fee is only four dollars and they keep their minimum funding deposit at an acceptably low $1,000. The best part of working with them is their offer of 100 free trades when you open any account with them.

Zecco

The opportunities at Zecco are unusual. The commissions fee are a decent seven dollars but they also charge an additional seven-dollar fee for trading stocks valued at less than one dollar. Shockingly, though, they have no requirement for minimum deposit. This is one of those brokers that will appeal to certain traders who cannot handle minimum funding requirements.

Trade King

At Trade King, they follow Zeccos example by not requiring a minimum deposit for their traders. Their commissions are just five dollars and this also makes them attractive for independent traders working in penny stocks. They do complicate matters when it comes to the actual trading of penny stocks, though. They charge a penny per share on trades of any stock that has a base value of less than one dollar. They do not allow trading in subpenny stocks at all.

Scott Trade

These penny stock brokers have a respectable name and that lends some confidence when you are dealing in penny stocks. The commission fee is just seven dollars and they only require $500 as their minimum deposit. However, when their traders deal in penny stocks that are valued below one dollar, they apply a penalty and add one-half a percent of the trade principle to the standard seven-dollar fee.