Penny Stock Alternatives

If you are a novice, it may be worth rethinking your plan for trading penny stocks. Whether it's high volatility, wide spreads or a lack of liquidity, the penny stock scene is not conducive to inexperienced investors. Even if you want to take the plunge, you will find it extremely difficult to access the Pink Sheets and OTC Bulletin Board as a retail trader.

With this in mind, it might be worth trading stock CFDs in the traditional sense. Remember that a company is still classified as a penny stock by the SEC even if it is listed on a major exchange - as long as it has a share price of less than $5. As a result, CFD stockbrokers will give you access to "penny shares", but in a regulated environment.

If you decide to trade shares listed on the London Stock Exchange, you will find that many of these companies have share prices of less than USD 5. This is because the UK stock markets price their shares in pence as opposed to pounds!

Below are some of the benefits of opting for stock CFDs rather than trying to buy penny shares on the OTC markets.

Legal

Stock CFD brokers must be in possession of a trading licence. At Learn 2 Trade, we go one step further and only recommend brokers that are licensed by first-class bodies.

This includes the likes of the FCA (UNITED KINGDOM), ASIC (Australia), CySEC (Cyprus) and MAS (Singapore). Among many other regulatory protections, Tier XNUMX licensing bodies require CFD exchange brokers to keep client funds in segregated bank accounts.

Main and secondary exchanges

When you use a stock CFD broker in exness member area login, you have access to major (US, UK, Japan) and minor (Australia, Canada, Germany, etc.) exchanges at the touch of a button. This means you can buy or sell your chosen company on your desktop or mobile device.

This is in stark contrast to penny stock trading brokers where you have to place orders over the phone. In addition, nothing is immediately available in the penny stock space as the broker has to respond to your requirements by negotiating with other brokers!

Tight spreads and low fees

You may recall that when buying and selling penny stocks on the OTC markets, we talked about the size of the spread. Ultimately, this is a direct trading fee that will make it extremely difficult to make a profit in the long run.

With traditional stock CFDs, you can often trade blue chip companies with spreads of less than 1 pip. What's more, most of the stock trading sites we recommend on this page allow you to trade commission-free - so you only pay the spread!

Easy payments

When you trade penny stocks with a CFD broker, you benefit from a seamless deposit and withdrawal process. Most platforms allow you to fund your account with a daily debit / credit card or bank account, and some even support e-wallets. This makes it super easy to get money in and out of your trading account.