Low Dollar or Penny Stocks

[Tawn]

Hi Jake,

I know you have been really interested in trading stocks online and I wanted to know if you have had any experience with low dollar or penny stock trading?

I have been interested in exploring this option since experiencing what stocks can do for you in the game.

Please let me know what websites youthink are the best & cheapest for buying/selling stocks.

Thanks,
Tawn

[Jake]

Tawn, I don’t trade penny stocks because they generally have greater risk with marginal reward compared to other strategies. One problem is the lack of information available to make an informed decision. Penny stocks are mostly found on the Pink Sheets or OTCBB and are NOT required to file with the SEC unlike stocks traded on the NYSE or Nasdaq.

There tends to be a lack of historical data on these stocks, which makes it very difficult for a trader to discern price patterns, trends, EPS, PE ratios, debt/equity ratios, etc. Also, you have to watch out for “pump and dump” scams. Some people do very well with penny stocks but in my opinion, it’s just not worth the risk.

Lately, I’ve been learning how to trade stock options, which can give you just as much of a return with lower risk (but there still is risk involved). I’m just a novice right now, but I can tell you that an ROI of 30-50% in the time frame of one week isn’t uncommon or very difficult once you have the proper education. Keep in mind that I’ve been learning this stuff since the summer and am only now ready to start trading with real money. If you’re interested I can give you the name of the company that’s providing me with the investor training.

It’s hard to say which website is best for trading stocks. I’m opening an account with optionsXpress because they are geared more for my trading strategy. Also, don’t think in terms of the “cheapest” or you’ll probably get what you pay for. Let me know what you decide to do or if you have any questions.

Good luck! ;D
- Jake