Beginners Information About Trading Penny Stocks Online

Beginners Information About Trading Penny Stocks Online

People have been trading penny stocks online since the very earlier days of the internet, and nowadays it is a simple matter for anyone who decides they want to get involved to start online trading.

However, there are several items you should be conscious of before deciding to start trading penny stocks online, not the smallest of which is that it is a gamble, and this applies regardless of your knowledge or experience. You require to have some money to invest and it should be money that you can afford to lose. Take in mind the worst-case scenario – i.e. that you could get it horribly wrong and your investment could vanish overnight. Fair warning if you don’t want to read anymore.

Much has been written about trading penny stocks online, in particular penny stocks, and by far more qualified people than me.

Trading Penny Stocks

If the idea of an exciting difficult investment strategy appeals to you, trading penny stocks could be the adrenalin fix you are pursuing. It’s pretty straightforward to get started, but success or failure is equally feasible results.

Firstly, penny stocks are usually described as stocks trading at below Rs 10 a share. Some people consider this arbitrary amount differently and would say that Rs 2 would be a better yardstick, but, whatever the description, these are shares usually traded outside of the primary exchanges. They are usually volatile and unpredictable and their performance is very difficult to monitor or predict.

It is fair to say that stock trading at a few cents a share is the most dangerous investment anyone could make – many experts would say foolhardy in the extreme. The attraction to buy thousands of shares for a few cents is one that usually results in many individuals getting their fingers burned. What you have to remember is that there is a cause the stock is so cheap – it actually isn’t worth much and the likelihood of making a killing on such shares is far from the foregone conclusion that some individuals will try to convince you are. Establishing the likely performance of these stocks is usually almost impossible as usually there is very little information available on the companies to do any kind of meaningful analysis.

Don’t be tempted into buying stocks simply because a newsletter or email tells you it is a sure thing. There are plenty of sharks out there who will encounter the practice known as “pump and dump”, whereby they will attempt to generate groundless hype about a particular stock in the hope that there will be a rush to buy, allowing them to sell on their worthless holdings to unsuspecting hopefuls. You actually must exercise caution and do your own “due diligence” – if you don’t, you will soon end up lamenting impulsive penny stock purchases.


Trading penny stocks online are not challenging, and once you have a basic understanding of how it works and choose to give it a try, you will need an account with an online stockbroker.

For penny stock trading there are many stockbrokers who offer a very good service. To set up an account you will require to submit an application form by post or online verification. This can be downloaded in PDF format from these brokers’ websites or apps. Once you have opened an account you will require to fund it.

In very simple words you will place orders with your broker via the online trading interface and they will take out your buying and selling instructions. Each trade you carry out, buying or selling, will cost you a small commission to the broker per trade. Many online trade brokers usually cost around Rs 20. 

Risk on Trading Penny Stocks

Presumably, your interest in trading penny stocks means that you are looking to make fast returns. It is true that the rewards can be fantastic- it is entirely probable to make hundreds of dollars in a day. By the same token, get it bad and the losses can soon mount up too. Day trading is not always profitable, but it’s always dangerous. Day traders buy stock and seek to sell it on the same day for a profit – the age-old buy low, sell high strategy. Of course, if the stock price drops, you have a decision to complete- sell it at a loss, or hold on in the hope that prices will recover and you can mitigate your losses.

You have to understand that not every stock you buy will esteem in value during the course of one trading day. This means you could end up with your risk capital tied up in one business, leaving you incapable to make any other trades until you empty the stock. Having all your eggs in one basket is therefore not a wonderful trading strategy.

For those with limited funds to invest in any stocks, this can offer a bit of a dilemma. There is little point in buying so few shares that exact if the price rockets upward, you will make only a few bucks- you must also remember to deduct brokerage fees or commission from overall profits too. If you are working with only a small amount of capital, you are going to require to find a reasonably priced stock that allows you to buy a few hundred shares, surely not less than 100. 

For example, if you can secure 300 shares and the price rises by 25 cents, you will net yourself only Rs 75 less any commissions – scarcely earth-shattering. On the other hand, if the stock value increases by one rupee, you have Rs 300. The basic math is simple sufficiently, so you require to look carefully at whether an investment is likely to be worthwhile relative to the amount you are able to invest.

It goes without saying that the more investment capital you have to invest, the more you stand to make, or lose. 

Trading or Demat Account

Opening a trading or Demat account is straightforward enough once you know the kind of account that you need for trading penny stocks or any other stocks. For a simple personal cash account, some brokers will need a minimum deposit and others will not but that is not recommended here, simply open any Demat account online that will be sufficient enough to manage. Shop around any stocks to find the best deal for your own personal possibilities. Charges will vary too according to different stockbrokers, and these all impact your bottom line, so make sure you know how much each trade is going to cost you.


Finally, I will repeat my earlier advice – never invest even a penny in anything that you can’t afford to lose. Trading Penny Stocks are a gamble, and if you don’t have the constitution for risking the purchase price, don’t start with online trading of any type. Sit back and have a good think about what you are preparing to do and what you hope to achieve through your investments. If you are thinking of day trading penny stocks you will need to be in a position to monitor your stocks throughout the trading day but it is recommended to trade fundamentally strong stocks – if you are not going to be capable to do this, you will not be able to sell when the necessity arises – i.e if the price should spike shortly. 

If you want to start trading penny stocks online, read up on the subject very carefully and learn as much as you can. There is plenty of helpful websites about trading penny stocks where you can begin to learn.

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