Small companies often issue stocks to grow business or capital. Similarly, a penny stock is created by a process called Initial Public Offering IPO. To list this stock in OTCBB, the company must file a registration statement with the SEC.
Moreover, a company should also keep an eye on state security laws where it wants to sell its stock.
If you want to know more about trading penny stocks, you’re at the right place.
Let’s read out: How to trade penny stocks on Etrade?
Trading penny stock on Etrade is as simple as trading any other stock here. First, click stocks from the Market & Ideas option. Now hit stock symbols as may see after clicking view results. Select the number of shares and add price limit, finally hit the option buy.
Indeed, penny stock does not actually trade like a normal stock. They are like lottery tickets. They don’t have regular buyers. That’s why they are traded infrequently. It’s much better to keep your money in a savings account rather than trading on penny stocks.
If you want to see how to buy and sell penny stocks, scroll down and see details with images.
What Is Penny Stock
It is defined as securities that trade less than $5 a share. A penny stock is a relatively low-priced stock of a company that is unable to list on any major or public exchange. It is risky to invest in unlisted companies.
Most penny stock firms are start-up firms having low net revenue. When such firms try to trade on Etrade, it charges commission. That’s why you’ll have to pay commission whenever you trade penny stock on Etrade.
Unlisted stocks are also known as pink sheet or bulletin board stocks. There is no limit to the minimum number of penny stocks shares you must purchase.
Does Etrade Allow Penny Stock Trading
Yes, you can trade penny stock and sub stock on Etrade. The reason is that Etrade does not set a minimum price for the stock it handles. In other words, it does not set a minimum price limit on stocks you place orders on.
On Etrade, you can trade a stock that is priced up to 4 decimal places under $1. It means a stock with a minimum price limit of $0.0001 is available for trade on Etrade. In case trading on such stocks is suspended or restricted, Etrade will not be responsible for handling buy and sell orders.
How To Trade Penny Stock With Etrade:10 Steps
To trade penny stocks on an Etrade platform, you first need to find and buy stocks.
It’s a pretty straightforward process. Here are few steps to show you how you can find and buy penny stocks on Etrade:
1-First of all login to your Etrade account
2-Go to the tab Market & Ideas
3-Go down and Click Stocks
4-From here go to the Stock screener
5-From here choose Market Segment
6-After this choose Price & Volume
7-Add any price you want such as .99 cents or something to the price share icon
8-It will show you the results the Etrade offers on this cent
9-Scroll down to view results
10-Here you can see the Mkt Cap of all of the big companies
11-Now click on the symbol of any particular company you want to open
12-If you click on it, you‘ll find the chart below
13-From here you’ll find the buy button and sell button at the left corner
14-When you click on the buy button a screen like this will open.
15-Here you’ll have to put a limit order
16- After putting a limit on the price click on the preview order.
Problem with Penny Stock Trading
Penny stocks are rarely traded securities on Etrade or any other trading platform. The reason is that once you buy them, it is hard to sell them. It is hard to find information about companies that are dealing with such stocks. So, buyers or investors fail to make well-informed decisions.
One more problem with penny stock trading is that companies who own it are not listed on major public exchanges. These companies are free from regulations associated with NASDAQ. These are mostly traded on Over-The-Counter Bulletin Board or Pink sheets.
This makes them unregulated stocks.
Moreover, trading penny stock is difficult. Inexperienced traders mostly fail in this type of trading. It is said that you lose more than you make here. The small price change equates to large moves on a percentage basis.
Lastly, the liquidity of penny stock is extremely thin. It means closing trade is difficult and it creates wide bid/ask spreads. This may lead to substantial losses.
How much does Etrade charge for penny stocks?
Etrade charges no commission on penny stocks. Many brokers have made this trade free. But few charge per trade commission. Moreover for online equity and ETFs trade, Etrade charges no commission.
How much money do you need to start trading penny stocks?
You may need a minimum of $5000 to trade penny stock. But it’s better to have more than this minimum amount. The more you have, the more you’ll earn. In this way, you can afford trade in a better way. As in Etrade, you may have to spend $14 per round trip(buying, selling, shorting, and covering)
What exchange do penny stocks trade on?
Penny stocks are traded on both large as well as small exchanges. It is traded on large exchanges such as the New York Exchange. It is also traded on OTC Over Counter transactions via Bulletin Boards. Moreover, privately owned OTC market groups also trade it.
It is evident from the above post that you can trade penny stock on Etrade. For this, you have to set a limited price order of stock. In simple words, you’ve to buy and sell a limited price order if you want to trade. To do so, all you need to do is to follow the steps mentioned above.
Lastly, I’d never advised trading penny stocks if you’re less experienced. It can risk your whole investment.