Penny stocks are stocks that trade for pennies on the various stock exchanges, especially Over the Counter Bulletin Board (OTC-BB) and Pink Sheets. The major advantages of penny stocks are their low prices and availability, but these stocks are considered high risk because they fluctuate in price a lot. You can trade penny stocks without paying stock brokerage fees.
Research the various stock brokerage houses. Before you can trade penny stocks, you need an account with a stock brokerage company. This can be a bank or a specialized stock brokerage house. Go online and research stockbrokers. Make note of those that offer free stock trades. Compare fees, minimum deposits, service charges, speed of transactions and customer service. Websites like Smart Money, Kiplinger, Barron's and JD Power and Associates maintain customer ratings on various stock brokerage houses. See Resources below for more information.
Open a trading account with your broker of choice who offers free trades. You can do this in many ways. To open an account, go to their local office where available, call the stockbroker, give them your information over the telephone or log onto their website and complete their online trading account form. The stockbroker will inform you when your account is ready for funding.
Fund your trading account when it is ready. You can do this through direct deposit from your bank account, wire transfer, money order or credit cards. Your stockbroker will tell you how best to accomplish this.
Research penny stocks through your stockbroker or online. When you have found the stock you want to buy, make note of the company name, trading symbol and current price.
Log onto your trading account and, following instructions from your stockbroker, enter the required information about the stock onto your trading platform and buy the stock free.
Follow Step 5 above to sell your penny stock when you are ready. If your stock's price has appreciated, the difference between your purchase price and sales price is your profit.
Penny stocks fluctuate in price. Vigilance is required when trading in OTC-BB and Pink Sheet listed issues. Do your research before trading in penny stocks. Stockbrokers may charge other fees. Research and understand these fees before committing to any brokerage house.