Penny stocks are some of the most exciting assets to trade. That’s because penny stocks give you the opportunity to get some incredible returns. However, it is important to have the best trading app for penny stocks.
Be aware that not all trading apps are ideal for trading penny stocks. That’s because some apps are not as stable as others. When trading penny stocks, you will want to be able to have an app that allows you to trade quickly. So which apps are ideal for penny stock trading. Here is a review of the top four apps for trading penny stocks.
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Stock Master has one of the most robust charts and trading tools that you can find from a penny stock broker. The app allows you to quickly scan multiple charts on one screen. Also, the responsiveness of the app is fast. This will be important for penny stock traders.
On the downside, this trading app can be a little busy for people who are just starting our if they are doing their research with other trading tools.
Stock Master is the choice for those who have lots of experience trading penny stocks. If you are a beginner, you may be a little intimidated by all the charts and the tools. However, if you give yourself some time to get familiar with the app, you will find it to be quite useful.
- Excellent tools
- Has online forums
- Fast response
- Complicated design
- Not well known
- Poor customer service
Trading 212 is not a big name in the penny stock trading world. However, this penny stock trading app is worth a look. You will find many of the benefits that you will find on biggest apps such as Robinhood. For instance, when you sign up for Trading 212, you can get a free stock worth up to $100. Also, there are no commissions on stocks and ETFs. Finally, the interface is fast and easy to use.
On the downside, there are not many tools that are available for research. Also, there are not many other products available. Finally, Trading 212 is based in the UK. This could be somewhat of a challenge for those trying to open an account from the United States.
Trading 212 is a pretty straightforward penny stock trading app. Don’t be dissuaded from the app because you have never heard of it before. The trading app is based in London and regulated by the UK Financial Conduct Authority (FCA).
- Free commission
- Free stock
- Easy interface
- Limited tools
- Limited products
- Lessor known
After Robinhood, eToro is perhaps one of the other bigger name penny stock trading apps that you can find. With eToro, you can literally sign up in seconds. As with most other penny stock trading apps, you will get a free stock for signing up. Also, trading stocks and ETFs are all comission free.
However, what really sets eToro apart from most other penny stock trading platforms is the social experience. eToro is set up so that you can easily communicate with other traders. Now, this can be a double-edged sword if you are listening to the wrong people or dealing with someone running a “pump and dump” scheme. However, if you engage with the other traders and ask questions, you will be able to get some valuable free information from other, more experienced traders.
eToro will be your choice if you want to have a great social experience with your penny stock trading. Also, sign-ups are fast. However, if you are not into the social experience, this penny stock trading app is still a great choice. Its excellent reputation means that you can trust this app with your penny stock trading.
- Fast sign-up
- No commissions
- Social experience
- Slow wtihdrawls
- Poor customer service
- Occasional slow fills
Robinhood is perhaps the most famous penny stock trading broker that is out there. You can get started in minutes with Robinhood and there are many penny stocks available on the platform. Also, you can begin trading right after you put in your deposit. You can also sign up for Robinhood “Gold” which will give you access to margin trading for a 5% annual fee.
Be aware that Robinhood is based in the United States and subject to the pattern day trading rule. That means that if you do more than three round trip trades within five trading days, then you will be restricted from trading from a set period of time.
Robinhood is the most familiar name of the four on the list. Therefore, you may be tempted to sign up with them first. You can’t go wrong with Robinhood. However, it is a good idea to check the other penny stock trading apps as well. You will want to see which app is most comfortable for you.
- Most popular software
- Get free stock
- Fast set-up
- Limited tools
- Occasional glitches
- Poor customer service
What are Penny Stocks?
Penny stocks are stocks that have a share price of less than $5. You can find penny stocks available at prices from anywhere from one penny a share up to $4.99 per share. Many of these shares are available on penny stock trading apps. However, if the stock is not available on any penny stock trading app, then it should be avoided. Don’t worry, there are literally thousands of penny stocks to choose from.
Some penny stocks are usually traded on the New York Stock Exchange (NYSE). However, most penny stocks are traded on the Over the Counter (OTC) Exchange. The OTC stocks are traded on the electronic OTC Bulletin Board (OTCBB) or the privately held pink sheets.
Be aware that just about any company can have its shares traded on the (OTC). There is very little regulation in these markets. That’s why it is important that you carefully research any penny stock before you buy it.
Penny stocks are also known as microcap stocks. That means the company that offers the stock has a market capitalization of less than $300 million. In some cases, a company that trades a penny stock can have a market capitalization of less than $50 million. That means that these stocks can swing wildly with vert littler money traded.
Who Should Be Trading Penny Stocks?
Penny stocks are some of the most volatile assets that you can trade. Therefore, you will want to be careful when you trade penny stock. First, if you are new to investing, then you should not be trading in penny stocks. These stocks move too quickly for new investors and you can end up losing all of your money fast if you don’t know how to use stock screeners, read stock charts or have a trading strategy.
Penny stocks are ideal for people who have at least a couple of experience trading stocks. Also, people who want to trade penny stocks should have a dedicated fund for trading these assets. For instance, if you have a $25,000 portfolio, then you should only dedicate 10% or $2,500 for trading penny stocks. Don’t worry. If you know how to trade penny stocks properly, you can easily double that amount in a year.
Pros and Cons of Trading Penny Stocks
There are many pros and cons to trading penny stocks. Here is a look at the pros of trading penny stocks:
- Low Price – You don’t need a lot of money to buy shares of a penny stock. Since these stocks are less than $5, you can buy 100 shares for less than $500. Compare that to a company like Amazon that offers one share for over $1,000
- Potential for Large Profit – Because these companies have a low market cap, the value of the penny stock can swing wildly with a little bit of money. This gives you the potential for a quick profit.
- Many Opportunities – When trading, you want to find stocks that have an opportunity to move big. There are many penny stocks available and many opportunities to find fast-moving stocks.
- Liquidity – Many penny stocks are pretty liquid. That means you can get into and out of those stocks fast.
- Easy to Trade – You simply buy and sell the stock. There is no complexity to trading penny stocks.
Now let’s take a look at the cons of trading penny stocks:
- Potential to Lose Money Quickly – Penny stocks can go up 50% to 100% in a day. These penny stocks can also move down quickly, too.
- Fraud Companies Are Common – There are some companies that trade penny stocks that are outright frauds. You will have to do your research to know which companies are worth your investment.
- Lots of Manipulation – There are many people who operate “pump and dump” schemes with penny stocks. They will tout the penny stock by a “guru” penny stock trader. However, the “guru” and his insiders will sell their position in the penny stock while you are buying.
How to Choose the Right Penny Stock to Invest In?
While penny stocks are one of the most exciting ways to trade, you will have to be careful. That’s because many of these penny stocks are cheap for a reason. You will want to make sure that the penny stock that you are buying is going to stay in business while you own it. Don’t just rely on stock tips from message boards or friends. Make sure that you understand what you are buying.
Here is how you can get started buying a penny. First, use a stock screener. This is a piece of software that you can use online for free. A stock screener will allow you to quickly get a shortlist of penny stocks to trade. First, only chose penny stocks that are able their 50 day and 20-day moving average. From there, filter out any penny stocks that are not based in the United States. Some overseas companies do not have the financial transparency of companies from outside the U.S. From there carefully research the companies left on your watchlist and pick the best one.
Getting Started With Penny Stocks
If you want to enjoy the excitement of trading a stock that can potentially give you exciting returns, then you will want to take a look at penny stocks. Penny stocks are defined as any stock that trades below $5 a share. Because these stocks are trading below $5 a share, they attract lots of attention from various groups of investors.
However, you should be aware that some penny stocks are cheap for a reason. You will want to make sure that you are not buying a penny stock that can become worthless. If you want to trade penny stock, make sure you either research the company well or understand how to read stock market charts.
If you are looking to buy a penny stock, create a watchlist of penny stocks that are above their 20-day moving average. From there, research the company and make sure it is not about to go bankrupt. You should have a profit target as well as a stop-loss target. With the right penny stock trading app and the right strategy, you will gain some real profits from trading penny stock.