How to Buy Penny Stocks - Information for the New Investor

Are you an investment newbie who is intrigued by the idea of penny stocks? If so, you may be wondering exactly how to buy penny stocks. What do you do first?

Well, first you must locate a broker who will be a middleman between you and the market, or the other investor/buyer/sellers. You tell the broker what you want to buy, how many shares of what company, and the broker tries to fulfill your order. Brokers can be full-service or discount. Brokers charge a commission fee for each fulfilled trade, but with a discount broker, you can place your trades yourself through a computer interface so the commission fees are much less.

There are pros and cons associated with each type of broker, and you may be more comfortable at first with the hand-holding you can get from a full-service broker. Maybe you want to consider the higher fees as a sort of educational expense. However, once you feel a bit less lost, you will probably want to switch to a discount broker for trading penny stocks. Some well known discount brokers include TDAmeritrade, E*Trade, and Scottrade.

Follow your broker's instructions about opening an account and make sure your account has enough money to cover the cost of your trade plus the commission fee. When you want to acquire shares of a stock, you give your broker a buy order. Your buy order should state the ticker symbol of the stock, the market the stock is trading on, the number of shares you want to buy, the price you are willing to pay for the shares, and how long your order should be considered active.

Where do you get the information needed for a buy order? That's where the research part of investing comes in. You can read and review several of the many penny stock newsletters available, join and ask questions in an on-line forum, or subscribe to a good recommendation service. Remember, though, that if you want to be a real penny stock investor, at some point you must take the leap and back your research with your money. That's where the exciting part of investing comes in.