Step 3: Open an Online Brokerage Account
Because of the volatile nature of low-priced stocks, a constant watch over the price movements is very vital. Moreover, if you are dealing with these kinds of stocks in the absence of broker’s assistance and guidance, you need to be very careful and having an account will make your sale and purchase of stocks very easy. Opening an online brokerage account is the best way to simplify your low-priced stock trading.
There are multitudes of online brokerage firms that provide individual investors with a number of choices. Some of the most trusted firms include TD Ameritrade, ShareBuilder, E*Trade, and Fidelity. There is no limit on the minimum amount required to open an investment account. However, these firms charge you around $1 to $4 for each individual trade. Apart from these companies, there are many other firms, which you can choose from according to your requirements, investment style and objectives. You can also link your brokerage account with a checking account so that you can fund your stock purchase with less trouble.
Step 4: Understand the working of over-the-counter stock trading
As we know that low-priced stocks are traded in small amounts and are not major exchanges, it is very important to understand how ‘over-the-counter’ stock trading works. Earning huge profits involves purchasing stocks at a minimal price and then selling them at maximum price. For getting the stocks at minimal price, you must ask a host of sellers and then go for the most affordable one.
The next step is to find a good deal for your stocks. For this, you need to decide a fair bid price and then sell them accordingly. It is very important to note that the cost price and the selling price will vary from one investor to other; hence, it is up to you how you select the best deal for your investment.
Step 5: Buy your low-priced stock wisely
After understanding all the basics of low-priced stock trading you can go ahead and start buying the stocks of your choice. With the help of online brokerage account, you can set the purchase orders of any amount that you desire to invest in these stocks. It is often recommended that limit orders are more rewarding than market orders in low-priced stock trading. This is suggested because with limit orders you have greater control over your transactions. On the other hand, if you go for market orders then it may happen that you purchase excessive stocks at too inflated rates or sell them at very low prices, as buyers and sellers may quote stocks wrong.
Investing in low-priced stocks without a broker is not an easy job. It involves a lot of risk and if you do not go about it systematically, it can lead to bankruptcy. Hence, do not make decisions in a hurry and remember that the best time for investing in low-priced stocks is when the company is making its initial public offering.