How to Start Trading Penny Stocks Online

Penny stocks typically refer to a small company's stock that trades for less than $5 per share in the financial markets. Because these types of stocks maintain low trading volumes, penny stocks can experience a lot more volatility than the more established and conventional equities. Put simply, this can lead to significant losses or gains, depending on when you opened a trade.

» Need help with CFD stock trading? See our short guide about trading CFDs on stocks

How you can trade Penny Stocks in 5 Simple Steps

Here are five simple steps to begin trading penny stocks:

1. Open a Trading Account

The first step is opening a trading account at a brokerage firm or investment platform tailored to your trading needs.

» Learn more about opening an account with Fortrade

2. Find the Stock You Want to Trade

Once you have opened a trading account and funded it, you can locate a penny stock you want to trade. Though there is no right answer as to which penny stocks you should trade, some available options include:

• Diversified Healthcare Trust (DHC)
• GrafTech International (EAF)
• Ring Energy (REI)
• Rolls-Royce Holdings (RLLCF)
• Safe Bulkers (SB)
• Timber Pharmaceuticals (TMBR)

3. Buy or Sell

After you have made a list of penny stocks you are interested in, you can decide to buy shares of these companies and then choose a price target for selling.

4. Manage the Risk

Even penny stocks can be risky, so managing this risk by employing certain trading mechanisms that can potentially increase profits or prevent major losses is critical. This could be a stop-loss order (an order placed to automatically close a trade once it has reached a specific price) or the take-profit route (after your instrument reaches a certain price, the trade would be automatically closed).

5. Monitor Your Position and Close the Trade

Ultimately, even if you are a passive investor, monitoring your investments by checking in on the share price or watching the overall financial markets is essential.

Should You Trade Penny Stocks?

Many newcomers might dive head-first into penny stocks, but it is crucial to do a few things first:

• Research the underlying company and determine if you can understand what it does
• Avoid any hype, and comb through the fundamentals
• Analyze volumes and historical performance

Remember, penny stocks are not for passive traders or individuals who do not understand how trading works. Like everything else, first, learn more about CFD trading, do your research, invest only what you can afford to lose, and always pay attention to what is happening in the markets.

» Learn more about trading stocks with Fortrade

Disclaimer

Fortrade offers the ability to trade the price changes of penny stocks with CFDs and NOT the ability to buy or sell shares/ownership of any given stocks.