Online Penny Stock Trading : 7 Simple Rules for Better Results

Online penny stock trading can lead to great rewards, but like any financial investing, it can lead to ruin if you’re not careful. I’ve traded stocks online of all sizes and I’ve been successful at it by following some basic, simple investing rules.

While the penny stock arena has some similar functionality as any typical stock buying and selling, there are some unique characteristics that you should know—especially if this is your first time engaging in online penny stock trading.

Rule One: Penny Stock Fraud – Pump and Dump Awareness

Unlike many stocks in the market, penny stocks are more susceptible to fraud. Typically, you can drastically reduce your chance of buying a bogus stock run by only buying stocks that trade on the major exchanges, such as NYSE and Nasdaq.

The pump and dump scam is easy to explain. First, a stock is talked about in as many channels as possible (penny stock forums, email, etc) to get a buzz going. As people buy the stock, it rises. At some point the originators sell it off and those who bought into the scam are left holding the bag.

Rule Two: Stock Research

This followed up rule one. Learn to do your own research. Even if you’re not a business wiz, just knowing a little bit will help. When someone tells you Company X is going to explode, find out why.

It’s easy enough to find information on a company. And if you can’t find it, move on.

Rule Three: Online Penny Stock Broker

Don’t get suckered by “unknown” brokers offering amazing deals. Find yourself a good, well-known online stock broker and go with them.

Rule Four: Don’t Get Married

Sometimes you’ll invest in a stock that starts moving the wrong way, has had its run or is just plain stagnant. If logic is telling you to get out, sell it. Keep emotional attachments out of transactions.

Rule Five: Penny Stock Software

Whatever interface your online stock broker provides should be more than enough for your trading purposes. Typically, stock software that gives picks doesn’t work too well. If that’s what you want, look for a good newsletter or service.

Rule Six: Google Alerts

Yep, Google can be an awesome everyday tool for investing. By using their “alerts” service, you can be notified whenever Google finds news, blogs, links or Web pages that are about whatever you wish to know about. You can put in a company’s name, domain name or whatever.

Just type in Google Alerts into the search engine to see the link to use if you don’t know already.

Rule Seven: Play with Speculation Money

This rule applies to all investing. Progress always involves risk. As such, you shouldn’t invest with any money you’re not 100% willing to lose. By actually following this rule, you’ll be more likely to keep emotion out of your transactions, which can yield better profits.