In addition to stocks and bonds which are traded throughout the day on the world's stock exchanges (and are quite well known), there are also a brand of stocks called penny stocks. Penny stocks are classified as stocks that are trading for less than $5 dollars a share, but many trade for less than $1 per share. These stocks are usually not sold on the major exchanges, but can be purchased "over the counter" with brokerage firms.

Investing in Penny Stocks?

Ask yourself whether you even want to get involved with penny stocks. These stocks act like regular stocks with the exception that you can buy many more shares due to the low price of the stock and they are prone to high volatility. Also, due to their low value, the slightest news of a company can have a huge effect on their performance. Because of this, penny stocks can sometimes be manipulated easily. Finally, there is often a lack of information pertaining to these stocks, which can make it difficult to make any informed decisions about them.

Starting Out

If you do decide to invest in these, set up an account with an online broker who provides access to penny stocks. Research different online brokers like ETRADE or Scottrade to learn their commission structure, fees and how their websites are set up. Once you have chosen a broker you like, sign up for an account and fund it. Sometimes these brokers will require you to have a minimum amount in your account so be sure to fund the correct amount. Funds can usually arranged by wire transfers into and out of your bank account.

Owning Penny Stocks

Once you have the money in the account, research the penny stocks you want to buy. Search for penny stock information and forums online. Allstocks.com has some good information on penny stocks and is a good place to start. When you have the stocks picked out, buy them using your brokers platform. Once you purchase the stocks, you will need to keep a constant eye on them to lock in your profit or minimize your losses. These types of stock can rise and fall second to second, so to not go broke, keep tabs on what they are doing. Once you have gained a sufficient profit or taken as big a loss as you can handle, sell the stock and look for your next one.

Source:

Pennystocks.org: What Are Penny Stocks?

NobvleTrading: Penny Stock Trading

Resource:

Etrade.org

Scottrade

Allstocks.com