Penny stocks are a class of high-risk, low-priced stocks with the potential for above-average returns.
Trading penny stock involves purchasing shares of small public companies at $5 or less.
They may look cheap, unstable, and sketchy, but these stocks are great for building small trading accounts quickly.
Even though there are plenty of options for stock trading platforms, Robinhood is the best place to get started.
Even veteran traders use the platform to make huge gains.
The platform allows access to popular under dollar stocks traded on bigger exchanges and does not charge a fee to place trades.
This blog details everything you need to know about trading penny stocks on Robinhood.
Trading Penny Stocks on Robinhood
Robinhood is an easy-to-use, commission-free trading platform accessible to a wider audience.
It doesn’t require a minimum deposit and allows you to buy partial stocks with its fractional shares feature.
With Robinhood, you get access to thousands of U.S. listed stocks, including those of companies that trade on the NYSE and Nasdaq – two of the biggest exchanges in the world. As of 2022, the platform allows trading in select Over The Counter (OTC) stocks.
Making Money on Penny Stocks
There are various reasons why you may want to invest in penny stocks.
In addition to being easy on the pockets, the market often overlooks penny stocks, and you can unlock value by finding small companies with robust product pipelines and solid fundamentals.
It can achieve incredible returns by investing in small companies with depressed stock prices or small valuations.
Buying shares in fast-growing companies allows you to take advantage of the share price upside instead of waiting until the companies have grown into giants.
However, no investment comes without risk. Penny stocks typically carry a higher risk than stocks from mature and established companies.
These stocks have lower market capitalization and are, therefore, less liquid.
This implies fewer sellers and buyers in the market for a particular company.
The stocks are easy to manipulate and attract ‘pumped-up’ investors who may jump on the bandwagon of artificially manipulated stocks.
This can quickly wipe your investment out if you’re not careful.
That said, you want to make sure you have enough information about the company, find great entry points, and manage risk properly.
Finding and Executing a Penny Stock Trade on Robinhood
Robinhood provides lists under the platform’s Trending Lists section.
Unfortunately, penny stocks are not listed here.
You must dig deeper and use filters to find the best Robinhood penny stocks.
To search for penny stocks:
- Login to your Robinhood account.
- Tap on the magnifying glass icon on the upper right side of the home screen to reveal the Trending Lists.
- Choose New OTC securities and sort the list in ascending order to see the different penny stock prices. Alternatively, you could tap the “Add filter” option to filter the price limits.
- Scroll down to the “Price” section and use one of the pre-set filter options like “Under $5” or set your preferred price range. This will show all the penny stocks available in your range.
You’ll see dozens of small companies.
The most important thing is to do your homework before jumping into the first trade that catches your eye.
Executing a penny stock trade on Robinhood is the same as any other trade you make on the platform.
You just need to fund your account, pick your stock, choose your order type, enter the number of shares to buy, and click ‘Buy.’
It’s that quick and easy.
Bottom Line
Penny stock training is a great way to build your trading account as a newbie.
Robinhood is a great place to trade penny stocks because it doesn’t have minimum deposits or fee requirements.
You just need to be extra careful because penny stocks have high risks.
Do your research and plan to get your profits and manage risks.
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