Since Penny Stocks are not long term investments, you trade more, so it’s important to understand your brokerage fees and any other restrictions or conditions on Penny Stock Trading. If your broker raises or limits the number of stocks you can trade in an order or day, it will reduce profits, especially on low dollar deals. Today we will take a look at the best tech stock to buy now.
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Some people go into penny stocks because they see it as a way to get into the market without spending much money. But if you’re trading $ 100 and your brokerage fees are $ 15 roundtrip, you’ll have to trade 15% just to break even. On the other hand, if you make $ 1,000 in transactions, $ 15 in brokerage fees is not that much of a problem. The next thing is how often you plan to trade. If you trade enough times to meet the SEC’s definition of a typical pattern-day trader, which generally means you make more than four round trips in five business days, you must have at least 25,000 $ on a margin account.
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If you trade with penny stocks, you should have enough in your account to stay in the game. The characteristics of the penny stocks mean that you will have some big losses, and hopefully some big gains, but if you trade only $ 1,000 and you can not close a position fast enough to avoid a huge loss on a trade You end up with just $ 500 or so in your account, and it’s very hard to make enough profit with $ 500 to compensate for your losses.
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Most people who are serious about trading penny stocks are starting out with about $ 5,000, because with this amount you are able to do decent business and still be within a conservative maximum risk level of 2% per trade. The bottom line is that penny stocks are volatile, risky and speculative securities, and they really are not an appropriate choice for most investors, especially those who do not risk much capital. If you do not have much money to invest or the money you have is earmarked for other savings goals, you should think twice before investing in penny stocks.
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