Robin - I practice what I preach a great deal of the time. I avoid penny stocks for the same reasons I caution people away from them.
Also, a great deal of my trades are done by discount brokers not through e*trade, e*schwab, etal.
I do not get the $ 19.95 pricing per trade that is offerred by these types of outfits but I get a very competitive rate based on the technical information I provide for these brokers. One hand washes the other. I trade in 1000 share blocks which runs me $ 75 per trade up to 2000 shares. After 2000 shares, I pay $ 0.04 per share. In return for my technical reads on stocks for them and talking to their clients on some occasions, I get this preferred rate and full service treatment relative to market analysts and analyst reports. They will work a trade for me and almost always fill my order closer to the bid than the ask. My extra commission is more than made up for with this type of service.
Even at 0.04 per share on huge volumes, a penny stock trade still costs me $ 0.08 per round trip. That is a hefty commission on a risky venture. More than 8% lost on each trade below $1. Its not worth it for me.
And for future reference, I try to stay away from stocks under $5 since this seems to be a threshold where brokerages are not allowed to solicit clients for stock recommendations. I do not like being invested in stocks where a majority of the full service companies have rules against soliciting clients below that level. This is important to me relative to hype, advertsing, pushing, recommending, and creating herd mentality for certain stocks.
People specialize in penny stocks and fortunes can be made. But fortunes can be lost. Above $5, everyone is involved with no restrictions. There is a more broader base of clientele and institutional coverage.
But that is my strategy and one that has worked well for me. |
