S&P 500   3,758.54 (-0.65%)
DOW   30,084.84 (-0.62%)
QQQ   280.06 (-0.68%)
AAPL   146.03 (-0.25%)
MSFT   247.12 (-0.83%)
META   136.92 (-1.48%)
GOOGL   101.06 (-0.36%)
AMZN   120.01 (-0.78%)
TSLA   236.23 (-1.90%)
NVDA   132.03 (-0.05%)
NIO   15.22 (-5.11%)
BABA   83.87 (-0.62%)
AMD   68.02 (+0.12%)
T   15.61 (-2.01%)
MU   53.44 (-2.36%)
CGC   2.99 (-2.61%)
F   12.35 (-1.28%)
GE   66.52 (-1.36%)
DIS   100.11 (-0.68%)
AMC   7.30 (-0.41%)
PYPL   94.32 (+0.52%)
PFE   43.50 (-1.41%)
NFLX   235.23 (-0.63%)
S&P 500   3,758.54 (-0.65%)
DOW   30,084.84 (-0.62%)
QQQ   280.06 (-0.68%)
AAPL   146.03 (-0.25%)
MSFT   247.12 (-0.83%)
META   136.92 (-1.48%)
GOOGL   101.06 (-0.36%)
AMZN   120.01 (-0.78%)
TSLA   236.23 (-1.90%)
NVDA   132.03 (-0.05%)
NIO   15.22 (-5.11%)
BABA   83.87 (-0.62%)
AMD   68.02 (+0.12%)
T   15.61 (-2.01%)
MU   53.44 (-2.36%)
CGC   2.99 (-2.61%)
F   12.35 (-1.28%)
GE   66.52 (-1.36%)
DIS   100.11 (-0.68%)
AMC   7.30 (-0.41%)
PYPL   94.32 (+0.52%)
PFE   43.50 (-1.41%)
NFLX   235.23 (-0.63%)
S&P 500   3,758.54 (-0.65%)
DOW   30,084.84 (-0.62%)
QQQ   280.06 (-0.68%)
AAPL   146.03 (-0.25%)
MSFT   247.12 (-0.83%)
META   136.92 (-1.48%)
GOOGL   101.06 (-0.36%)
AMZN   120.01 (-0.78%)
TSLA   236.23 (-1.90%)
NVDA   132.03 (-0.05%)
NIO   15.22 (-5.11%)
BABA   83.87 (-0.62%)
AMD   68.02 (+0.12%)
T   15.61 (-2.01%)
MU   53.44 (-2.36%)
CGC   2.99 (-2.61%)
F   12.35 (-1.28%)
GE   66.52 (-1.36%)
DIS   100.11 (-0.68%)
AMC   7.30 (-0.41%)
PYPL   94.32 (+0.52%)
PFE   43.50 (-1.41%)
NFLX   235.23 (-0.63%)
S&P 500   3,758.54 (-0.65%)
DOW   30,084.84 (-0.62%)
QQQ   280.06 (-0.68%)
AAPL   146.03 (-0.25%)
MSFT   247.12 (-0.83%)
META   136.92 (-1.48%)
GOOGL   101.06 (-0.36%)
AMZN   120.01 (-0.78%)
TSLA   236.23 (-1.90%)
NVDA   132.03 (-0.05%)
NIO   15.22 (-5.11%)
BABA   83.87 (-0.62%)
AMD   68.02 (+0.12%)
T   15.61 (-2.01%)
MU   53.44 (-2.36%)
CGC   2.99 (-2.61%)
F   12.35 (-1.28%)
GE   66.52 (-1.36%)
DIS   100.11 (-0.68%)
AMC   7.30 (-0.41%)
PYPL   94.32 (+0.52%)
PFE   43.50 (-1.41%)
NFLX   235.23 (-0.63%)

Best Penny Stocks to Buy

Penny stocks are public companies that have a share price of under $1.00 and a market capitalization of under $100 million. This page lists the most popular (best) penny stocks among MarketBeat Subscribers. These stocks are sorted by the number of MarketBeat users following each company. Learn more about investing in penny stocks.

MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.
Available with a MarketBeat All Access Subscription
MarketRank™Upgrade to All Access to use the All Ranks Filter
Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
Available with a MarketBeat All Access Subscription
Media SentimentUpgrade to All Access to use the All Sentiments Filter
Analyst consensus is the average investment recommendation among Wall Street research analysts.
Available with a MarketBeat All Access Subscription
Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyCurrent PriceMarketBeat FollowersMarket CapTrading VolumeIndicator(s)
HEXO Corp. stock logo
HEXO
HEXO
$0.18
-2.1%
2,057$107.70 million34,120 shs
Corbus Pharmaceuticals Holdings, Inc. stock logo
CRBP
Corbus Pharmaceuticals
$0.17
-1.6%
1,780$20.78 million2,278 shsGap Up
Zynerba Pharmaceuticals, Inc. stock logo
ZYNE
Zynerba Pharmaceuticals
$0.75
+2.7%
1,554$34.30 million408 shsNews Coverage
Tonix Pharmaceuticals Holding Corp. stock logo
TNXP
Tonix Pharmaceuticals
$0.54
-4.8%
1,488$24.35 million2,375 shs
OrganiGram Holdings Inc. stock logo
OGI
OrganiGram
$0.90
-1.0%
1,459$281.28 million2,311 shsGap Down
Genius Brands International, Inc. stock logo
GNUS
Genius Brands International
$0.68
+1.9%
1,429$215.69 million1,840 shsPositive News
22nd Century Group, Inc. stock logo
XXII
22nd Century Group
$0.96
-1.2%
1,373$205.90 million19,833 shsGap Down
Unity Biotechnology, Inc. stock logo
UBX
Unity Biotechnology
$0.40
+0.9%
1,369$28.09 million1,323 shsNews Coverage
ContextLogic Inc. stock logo
WISH
ContextLogic
$0.84
-2.4%
1,280$562.60 million22,486 shsInsider Selling
Ideanomics, Inc. stock logo
IDEX
Ideanomics
$0.27
+2.7%
1,279$134.38 million57,427 shsGap Up
Exela Technologies, Inc. stock logo
XELA
Exela Technologies
$0.44
-0.4%
1,179$28.46 million26,633 shsPositive News
VBI Vaccines Inc. stock logo
VBIV
VBI Vaccines
$0.73
+1.2%
1,176$188.53 million287 shs
AcelRx Pharmaceuticals, Inc. stock logo
ACRX
AcelRx Pharmaceuticals
$0.22
-1.3%
1,124$32.09 million249 shsAnalyst Report
News Coverage
Gap Down
Mullen Automotive, Inc. stock logo
MULN
Mullen Automotive
$0.33
-3.8%
1,067$167.61 million370,007 shs
Onconova Therapeutics, Inc. stock logo
ONTX
Onconova Therapeutics
$0.86
-2.2%
1,019$17.90 million78,457 shsGap Up
Trevena, Inc. stock logo
TRVN
Trevena
$0.18
+5.8%
997$31.78 million2,674 shsAnalyst Report
Gap Down
T2 Biosystems, Inc. stock logo
TTOO
T2 Biosystems
$0.10
+2.4%
986$35.78 million123,832 shsAnalyst Report
Adamis Pharmaceuticals Co. stock logo
ADMP
Adamis Pharmaceuticals
$0.15
+4.0%
971$22.44 million21,092 shsNews Coverage
Evofem Biosciences, Inc. stock logo
EVFM
Evofem Biosciences
$0.17
964$17.16 million1.77 million shsGap Up
Jaguar Health, Inc. stock logo
JAGX
Jaguar Health
$0.17
-3.6%
882$20.82 million38,650 shsAnalyst Report
News Coverage
Gap Up
Meta Materials Inc. stock logo
MMAT
Meta Materials
$0.68
-1.4%
863$245.37 million7,100 shsNews Coverage
Gap Down
Atossa Therapeutics, Inc. stock logo
ATOS
Atossa Therapeutics
$0.85
+0.1%
843$107.77 million25 shsGap Down
Acasti Pharma Inc. stock logo
ACST
Acasti Pharma
$0.63
+1.4%
825$27.97 million47,605 shsGap Up
Biocept, Inc. stock logo
BIOC
Biocept
$0.89
+1.0%
817$15.10 million18,516 shsAnalyst Report
Gap Up
Westport Fuel Systems Inc. stock logo
WPRT
Westport Fuel Systems
$0.94
-0.5%
807$160.26 million1,041 shs
Inpixon stock logo
INPX
Inpixon
$0.12
-1.0%
793$20.20 million23,463 shs
Seanergy Maritime Holdings Corp. stock logo
SHIP
Seanergy Maritime
$0.52
-8.8%
786$79.63 million10,209 shsAnalyst Report
Positive News
Gap Down
Agile Therapeutics, Inc. stock logo
AGRX
Agile Therapeutics
$0.31
+1.1%
772$11.90 million831 shsShort Interest ↓
News Coverage
Gap Up
Verastem, Inc. stock logo
VSTM
Verastem
$0.55
+3.8%
768$103.28 million18,915 shsAnalyst Report
Gap Up
Romeo Power, Inc. stock logo
RMO
Romeo Power
$0.40
-2.4%
733$75.11 million3,668 shsPositive News
Spectrum Pharmaceuticals, Inc. stock logo
SPPI
Spectrum Pharmaceuticals
$0.43
732$80.14 million1,494 shsAnalyst Report
Sesen Bio, Inc. stock logo
SESN
Sesen Bio
$0.49
+1.3%
700$96.94 million240 shsGap Down
XpresSpa Group, Inc. stock logo
XSPA
XpresSpa Group
$0.77
-3.0%
693$72.13 million158,377 shs
ReWalk Robotics Ltd. stock logo
RWLK
ReWalk Robotics
$0.92
-2.0%
682$57.57 million2,907 shs
BioLineRx Ltd. stock logo
BLRX
BioLineRx
$0.93
-1.1%
673$44.51 million248,460 shsAnalyst Revision
Aytu BioPharma, Inc. stock logo
AYTU
Aytu BioPharma
$0.20
+3.0%
651$12.36 million7,191 shsGap Up
Diversified Healthcare Trust stock logo
DHC
Diversified Healthcare Trust
$0.96
-2.0%
645$229.68 million807 shsPositive News
Boxlight Co. stock logo
BOXL
Boxlight
$0.63
-1.6%
644$46.39 million2,238 shs
9 Meters Biopharma, Inc. stock logo
NMTR
9 Meters Biopharma
$0.23
-1.3%
630$59.62 million3,000 shsAnalyst Report
News Coverage
Positive News
ARVL
Arrival
$0.77
-0.7%
616$489.69 million25,898 shsShort Interest ↑
Qudian Inc. stock logo
QD
Qudian
$0.98
+2.1%
613$247.90 million310 shsGap Down
Applied Genetic Technologies Co. stock logo
AGTC
Applied Genetic Technologies
$0.27
+1.9%
603$13.57 million147 shsAnalyst Downgrade
News Coverage
Gap Up
Lannett Company, Inc. stock logo
LCI
Lannett
$0.49
+2.0%
572$21.03 million4 shs
Remark Holdings, Inc. stock logo
MARK
Remark
$0.30
-1.9%
570$32.02 million6,022 shsGap Down
Conformis, Inc. stock logo
CFMS
Conformis
$0.21
+4.3%
566$39.49 million4,000 shsAnalyst Report
Gap Up
ASAP, Inc. stock logo
WTRH
ASAP
$0.16
-3.9%
553$30.62 million42,379 shsGap Up
Daré Bioscience, Inc. stock logo
DARE
Daré Bioscience
$0.99
-5.7%
549$83.97 million467,167 shs
Aptose Biosciences Inc. stock logo
APTO
Aptose Biosciences
$0.59
+0.6%
546$54.45 million1,100 shsAnalyst Report
XL Fleet Corp. stock logo
XL
XL Fleet
$0.90
-0.4%
543$127.50 million574,073 shs
Cinedigm Corp. stock logo
CIDM
Cinedigm
$0.44
+3.1%
541$78 million3,626 shsAnalyst Report
Curis, Inc. stock logo
CRIS
Curis
$0.81
+0.3%
538$74.20 million702 shs
Idera Pharmaceuticals, Inc. stock logo
IDRA
Idera Pharmaceuticals
$0.41
+0.8%
516$21.62 million100 shsAnalyst Report
News Coverage
VEON Ltd. stock logo
VEON
VEON
$0.35
511$612.20 million1,519 shsAnalyst Report
Gap Down
Akebia Therapeutics, Inc. stock logo
AKBA
Akebia Therapeutics
$0.33
+5.1%
508$61.06 million1,320 shsAnalyst Report
VYNE Therapeutics Inc. stock logo
VYNE
VYNE Therapeutics
$0.26
+10.0%
508$15.31 million264,491 shsPositive News
Gap Up
Check-Cap Ltd. stock logo
CHEK
Check-Cap
$0.30
+1.2%
507$28.45 million100 shs
MEI Pharma, Inc. stock logo
MEIP
MEI Pharma
$0.40
-3.6%
493$53.30 million5,601 shs
Progenity, Inc. stock logo
PROG
Progenity
$0.47
-1.7%
485$86.87 million1.19 million shs
VistaGen Therapeutics, Inc. stock logo
VTGN
VistaGen Therapeutics
$0.16
-4.0%
473$32.29 million46,436 shsNews Coverage
RedHill Biopharma Ltd. stock logo
RDHL
RedHill Biopharma
$0.61
-2.7%
469$32.02 million17,467 shsAnalyst Report
News Coverage
Gap Up
Aqua Metals, Inc. stock logo
AQMS
Aqua Metals
$0.82
468$63.10 million96,626 shs
ObsEva SA stock logo
OBSV
ObsEva
$0.17
-2.5%
458$13.51 million200 shsGap Up
DURECT Co. stock logo
DRRX
DURECT
$0.57
+2.2%
455$129.39 million1,400 shs
Humanigen, Inc. stock logo
HGEN
Humanigen
$0.18
-5.6%
455$18.77 million16,247 shs
Lipocine Inc. stock logo
LPCN
Lipocine
$0.50
-1.6%
454$44.35 million126,944 shsAnalyst Report
Sphere 3D Corp. stock logo
ANY
Sphere 3D
$0.44
-5.3%
453$28.28 million1.03 million shsGap Up
High Trading Volume
Kala Pharmaceuticals, Inc. stock logo
KALA
Kala Pharmaceuticals
$0.25
+2.2%
445$18.34 million734 shsPositive News
Gap Up
Athenex, Inc. stock logo
ATNX
Athenex
$0.26
-1.8%
421$31.98 million4,307 shs
OncoSec Medical Incorporated stock logo
ONCS
OncoSec Medical
$0.46
-5.7%
421$18.11 million1 shsAnalyst Report
News Coverage
Gap Up
Vyant Bio, Inc. stock logo
VYNT
Vyant Bio
$0.58
+3.4%
420$17.14 million58 shsAnalyst Report
News Coverage
Gap Up
OpGen, Inc. stock logo
OPGN
OpGen
$0.28
-0.1%
415$13.53 million500 shsGap Up
Fortress Biotech, Inc. stock logo
FBIO
Fortress Biotech
$0.95
+6.3%
407$102.87 million300 shsNews Coverage
Gap Up
Tyme Technologies, Inc. stock logo
TYME
Tyme Technologies
$0.31
+7.8%
407$53.38 million67,913 shsPositive News
Gap Up
Ontrak, Inc. stock logo
OTRK
Ontrak
$0.48
-1.5%
402$12.57 million192,642 shs
Molecular Templates, Inc. stock logo
MTEM
Molecular Templates
$0.81
+1.3%
401$45.64 million100 shsGap Down
Vislink Technologies, Inc. stock logo
VISL
Vislink Technologies
$0.43
-3.4%
396$20.61 million126,091 shsPositive News
AIM ImmunoTech Inc. stock logo
AIM
AIM ImmunoTech
$0.56
-3.3%
395$27.04 million82,928 shs
Ocean Power Technologies, Inc. stock logo
OPTT
Ocean Power Technologies
$0.99
+5.3%
389$55.36 million205 shsNews Coverage
Positive News
Gap Up
Uxin Limited stock logo
UXIN
Uxin
$0.69
+0.6%
389$272.98 million6,010 shs
AquaBounty Technologies, Inc. stock logo
AQB
AquaBounty Technologies
$0.76
-1.9%
387$54.12 million2,171 shsPositive News
Drive Shack Inc. stock logo
DS
Drive Shack
$0.67
-1.4%
386$61.49 million478,821 shs
Foresight Autonomous Holdings Ltd. stock logo
FRSX
Foresight Autonomous
$0.54
-4.1%
374$34.73 million196 shsPositive News
Digital Ally, Inc. stock logo
DGLY
Digital Ally
$0.46
-0.5%
366$22.17 million200 shsAnalyst Report
Gap Up
Hall of Fame Resort & Entertainment stock logo
HOFV
Hall of Fame Resort & Entertainment
$0.65
+4.9%
364$73.21 million3,200 shsPositive News
Cocrystal Pharma, Inc. stock logo
COCP
Cocrystal Pharma
$0.27
+3.5%
362$26.19 million382 shsStock Split
News Coverage
Positive News
BioSig Technologies, Inc. stock logo
BSGM
BioSig Technologies
$0.75
+10.3%
362$33.77 million7,252 shs
Precipio, Inc. stock logo
PRPO
Precipio
$0.84
352$19.14 million33,901 shsNews Coverage
Gap Down
Hycroft Mining Holding Co. stock logo
HYMC
Hycroft Mining
$0.66
-0.2%
351$131.81 million4,499 shsNews Coverage
Positive News
Brooklyn ImmunoTherapeutics, Inc. stock logo
BTX
Brooklyn ImmunoTherapeutics
$0.25
+4.5%
349$14.72 million337,868 shsGap Up
IZEA Worldwide, Inc. stock logo
IZEA
IZEA Worldwide
$0.74
+1.8%
348$46.26 million800 shsGap Down
Compugen Ltd. stock logo
CGEN
Compugen
$0.68
-1.4%
346$58.91 million4,642 shsGap Up
Titan Medical Inc. stock logo
TMDI
Titan Medical
$0.45
-4.7%
339$50.35 million6,100 shsPositive News
Gap Up
Sientra, Inc. stock logo
SIEN
Sientra
$0.86
+5.0%
331$53.99 million3,600 shsGap Down
Arcadia Biosciences, Inc. stock logo
RKDA
Arcadia Biosciences
$0.55
-0.9%
328$12.25 million88,524 shsAnalyst Report
News Coverage
electroCore, Inc. stock logo
ECOR
electroCore
$0.38
+3.0%
323$27.03 million100 shsGap Down
Orbital Infrastructure Group, Inc. stock logo
OIG
Orbital Infrastructure Group
$0.47
-4.2%
323$54.00 million10,409 shsPositive News
Gap Down
Aethlon Medical, Inc. stock logo
AEMD
Aethlon Medical
$0.67
+0.4%
321$11.19 million53,901 shsGap Up
Chembio Diagnostics, Inc. stock logo
CEMI
Chembio Diagnostics
$0.40
-3.8%
317$14.16 million1,958 shsAnalyst Report
News Coverage
Gap Down
Predictive Oncology Inc. stock logo
POAI
Predictive Oncology
$0.36
-2.8%
313$28.15 million271,872 shsGap Down
Astra Space Operations, Inc. stock logo
ASTR
Astra Space Operations
$0.60
-3.9%
312$160.08 million21,717 shs
What to Know About Investing in Penny Stocks

Investing in penny stocks may seem like a great idea because of the low initial investment involved in your investment. In short, the main perk of investing in penny stocks is this: They're cheap! They may appeal to investors or traders who don't have a lot of capital to invest or who may be just getting started trading.

Even though they require minimal investment, they also carry significant risks. To help you decide whether penny stocks make sense for your portfolio, we'll walk through a comprehensive definition of penny stocks, whether you can make money with penny stocks, the risks associated with penny stocks, how to choose penny stocks and how to choose the right penny stocks.

By the time you're done reading, you'll have a better idea of whether you want to take on penny stocks as part of your investment strategy. 

What Are Penny Stocks?

In order to explain penny stocks, let's first go over the definition of a stock. A stock, often called a "security," represents a unit of ownership of a company. Penny stocks, which are also called “microcap” or “nanocap” stocks, are low-value stocks of smaller companies. The stocks are slightly misnamed because they do not necessarily cost a penny at all. However, they are often priced under $2 per share. The Securities and Exchange Commission (SEC), defines penny stocks as those with a market capitalization of less than $250 million.

Penny stocks are some of the most high-risk securities you can trade because they have a small market capitalization and trade for a relatively low share price. 

Where do you find penny stocks? Some penny stocks trade on large exchanges like the New York Stock Exchange (NYSE) or the Nasdaq. However, many penny stocks trade on the over-the-counter (OTC) market or off-trading exchange. This is a decentralized market which means you can trade stocks or other instruments between two parties, without a central exchange or broker. You can access thousands of stocks on the OTC Markets, which are traded on three markets.

Can You Make Money With Penny Stocks?

Yes, it is possible to make money when you trade penny stocks. However, it's important to remember that it is possible to invest in a wide variety of securities and make money. However, it's important to focus on your reasoning behind choosing certain companies —you want to invest in the right companies based on your specific needs.

Risks Associated with Penny Stock Trading

Penny stocks are usually considered high-risk investments due to their low price, high potential for fraud, lack of liquidity, small market capitalization, wide bid-ask spread and high potential for loss.

Risk 1: Penny stocks' lower price could prompt losses.

Penny stocks' low price can be a huge risk. Moving in either direction — a gain or a loss — can happen quickly. For example, let's say a penny stock moves from $1 a share to $1.50, it's an incredible gain. However, it could also go the other way, going from $1 a share to 50 cents per share.

Because of this inherent volatility, penny stocks can be hugely risky. Volatility means that the price of a stock increases or decreases, and higher volatility often equates to higher risk.

Risk 2: Penny stocks could have potential for fraud.

Some penny stocks have been pushed by fraudsters, who have a dormant shell company cover and push pump-and-dump schemes. They buy low-priced penny stocks and spread "news" that the stocks are excellent, then increase the price. These fraudsters typically get rid of their shares and investors end up with worthless shares. 

One of the best ways to avoid this issue is to thoroughly investigate the company. Incredible  growth can be a red flag because the shell company itself might exist on fairly spindly legs. It's important for investors to research whether the company has been raised from the dead, know where the stock trades — most don't trade on the major exchanges and check into frequent changes of a company's name.

The OTC Markets Group categorizes the stocks into various divisions (based on factors such as company integrity and disclosures) which essentially divides them into higher-quality stocks to lower-quality stocks:

  • OTCQX (best tier)
  • OTCQB (middle tier) 
  • OTC Pink (bottom tier)

Risk 3: You'll find a lack of liquidity in penny stocks.

Liquidity means how easy it is for you to transform an asset from stock into cash. Liquidity refers to how easily securities can be sold. You can consider a stock as liquid when you can't sell them without experiencing a loss when you sell. Because many people don't invest in penny stocks, it's tough to unload them, particularly when their price starts to go down.

Risk 4: Penny stocks' small market capitalization can affect your results.

Penny stocks are often considered small cap stocks, which means that they have a small market capitalization. It's a company's share price times the number of shares outstanding. A small market capitalization has a rough capitalization between $300 million and $2 billion.

Ultimately, small-cap companies tend to be riskier investments than larger companies because they don't have the same resources of large-cap companies, which means that small caps are more susceptible to challenges than larger companies.

Risk 5: Penny stocks have a wide bid-ask spread.

The bid-ask spread is the difference between the highest offered purchase price and the lowest offered sales price for a security. The wider the bid-ask spread, the more volatile the stock, which means that the stocks may pinball more quickly compared to stable stocks.

How to Trade Penny Stocks

How do you trade penny stocks? Let's take a quick look at how to trade penny stocks, step by step. Perhaps one of the most important portions of the decision is to do your research before you start trading. Let's take a look.

Step 1: Do your research. 

It's important to do wide research before you make a final decision about your decision to trade penny stocks. Most importantly, consider whether these stocks are legitimate prior to investing — one of the worst reasons to choose them is that you get cheap shares.

How does a particular company make money? You can learn a lot by checking out the Securities and Exchange Commission (SEC) website in order to determine whether the company has been delisted from a major exchange. The company's most recent SEC filing will also give you major clues into whether you should invest in a particular penny stock. We'll also walk through a few more factors you should consider before you invest in the next section, such as revenues and fundamentals.

Step 2: Choose a broker.

It's important to choose a broker that matches your preferences and needs. Researching the differences between brokers can help you decide. For example, you may want to compare the charges for penny stock trades from one brokerage account to another because many brokers charge extra for penny stocks. Also, take a look at current incentives. 

You may also want to consider the platform available among the brokers you're considering. You likely want to find the best platform that fits your comfort level. For example, if you need a lot of hand-holding, you may want to consider a platform that offers a lot of helpful tools. On the other hand, if you're an experienced trader, you may want to consider a more complicated platform that offers more bells and whistles, including independent third-party research, educational resources and planning tools.

Once you've landed on the right type of brokerage account for you, fill out the new account application, fund the account based on the required minimum investment. Finally, you can get going with your own research.

Step 3: Decide which penny stocks you want to trade.

The OTC Markets website can give you a good idea of which direction you should go, particularly when you consider which investments you want to pull from high- to low-tier investments: OTCQX (best tier), OTCQB (middle tier) and OTC Pink (bottom tier). Choosing from these categories can help you determine how well your trades may pay off.

Step 4: Begin trading. 

Consider learning how to trade from your broker's platform. Practicing how to trade using "fake" trading (also known as paper trading) can also help you practice so don't suffer from staggering penny stock losses.

Finally, never invest more than you're willing to lose. You could risk losing some or all of the money you invest in penny stocks. 

How to Choose the Right Penny Stocks

When you want to invest in the "right" penny stocks, it's important to take a look at various factors before you hone in on a great penny stock for your portfolio, including the soundness of the business and fundamentals as well as the management of the company. 

How does the business operate? Have there been major changes in the business lately, such as an addition to the business or a switch in management? Have the revenues of the company been growing? Furthermore, what are the basic fundamentals of the company and how has the company performed based on hard-and-fast fundamentals? 

A few key fundamentals include finding the net sales/earnings before interest, taxes, depreciation and amortization (EBITDA). (You can calculate net income by subtracting all expenses from total revenue and in order to calculate EBITDA, you add the interest and tax line items into the mix as well as the depreciation and amortization.) You can also look into other fundamentals, such as low price-to-earnings ratio and more. 

Looking into how the company is managed can give you a bird's eye view of how well the company’s management team manages the company. Gather as much information as possible about the leadership of the company.

There's an argument that says you don't necessarily have to look into "all that" when trading because you're looking for small price movements, but there's value in doing the background work.

Should You Invest in Penny Stocks?

Ultimately, it's up to you whether you think you should go this route. If you're looking for a get-rich-quick scheme, it's important to understand that they are highly speculative investments that can offer a tantalizing image, such as quintupling your money over the course of a few weeks. However, this could be a mirage — in reality, you could be at risk for serious fraud and loss of funds. 

What are the alternatives to investing in penny stocks, particularly if you're interested in investing in a small amount of money? You may want to consider investing in fractional shares of stocks instead of penny stocks. Fractional shares mean that you purchase partial shares of larger companies for the same amount that you might spend on penny stocks. That way, you'll invest in more well-respected companies. You can consider using micro-investing apps (such as Acorns) which allow you to invest in fractional shares of these well-regarded companies. 

On the other hand, if you do comprehensive research and find that a particular company meets your needs, you may want to give penny stock trading a try. 

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