The Best Penny Stocks Basics - What Are Penny Stock Brokers?

Penny stocks have been receiving a lot of attention lately in the financial world. That's because they're relatively inexpensive to break into. Penny stocks represent stock picks that have low initial purchasing costs, sometimes of around 80 cents or a few dollars per share. The advantage and the allure of these stock options is that they can be bought in considerable volume at, say, a few thousand shares, which makes even small positive fluctuations in their share price financially significant. Many new stock traders that are just trying to get their start as they feel out the new world of investment will go through penny stock brokers for advice on the best penny stocks and purchasing tips.

Many stock holders will go through penny stock brokers, although this is not entirely necessary. You always have the option of individually registering on your own through an online stock trading site and handling your own penny stock transactions, deciding yourself what the best penny stock picks are and leaving out the penny stock brokers fee that would have added to your overall investment costs.

Penny stock brokers may be brokers that specialize in penny stocks, having researched, traded and kept abreast of the rapid market changes that affect the best penny stock picks. Or they might normally handle other investment instruments but also offer their services as penny stock brokers. Regardless of their background or specialty, there are a couple of things you want to keep in mind when shopping around for penny stock brokers.

Tips to Having a Positive Experience with Penny Stock Brokers

Before you start trading penny stocks and trying to zero in on the best penny stock picks, make sure you know what a penny stock actually is. According to the Securities and Exchange Commission, penny stocks are typically those stock options that trade for less than $5 per share, a relative market low. Now, although this typical per share price makes penny stock picks ideal for new traders that just want to get their feet wet in the stock market without making a painfully large initial investment, there is one thing that many penny stock brokers do which will make it more difficult to profit by trading penny stocks.

Some penny stock brokers will charge special fees per trade on stocks whose share price is lower than $1 or $2. Since the margins for profitably trading penny stocks are already so thin, even a couple pennies out of each trade can drastically cut into your penny stock trading profits.

By shopping around, you can definitely find a couple of only penny stock brokers that do not charge any special or additional fees for trading such low cost stocks. You may need to dig into some of the fine print to ensure you won't be surprised later by any special penny stocks trading fees, but a little bit of time spent upfront can save you a lot of headaches and frustration later.

A second important tip to follow when you're trading penny stocks online via a penny stocks broker is to always stick to self-directed buying and selling - only via the website if at all possible. Even brokers that do not charge special fees for penny stocks will still charge you a comparatively massive amount of money if you accept any offer to make your trades via a phone call. This phone call will constitute a broker assisted trade, and can cost upwards of $50 per call! Don't fall for this one - just stay off the phone and make your trades on your own.