How to Find Low Float Penny Stocks to Buy
Nasdaq Micro-caps and Nasdaq Penny Stocks are similar stocks used on the Nasdaq, which are interchangeable. The Nasdaq Penny Stocks, sometimes called micro-caps, shares used on the Nasdaq, which are under a dollar and are considered low risk. They have high liquidity compared to other stocks which makes trading them easier and less complicated. They can be traded online and do not need to be broke or registered.
The only requirement for Nasdaq Penny stocks is that it should have a market price of below five dollars, which makes it easy to be traded and allows for lower margin requirements. It does not matter what the company does or what kind of product it makes, it is simply listed as Nasdaq Penny stocks. One characteristic of these kinds of stocks is that they have very low liquidity, meaning there aren’t many buyers and sellers, so they do not go through the over the counter process as other Nasdaq stocks do. These types of shares have low liquidity and are usually under a dollar, so investors have less control over the price and are not able to influence it like they can with a listed company.
Because of the lack of market liquidity, there is no official method of determining the price or value of these types of Nasdaq trading stocks. Traders and investors use different methods to determine these values, but one method that has been used for many years is called the Price/Volume Trend, or PVT. Traders and investors use charts to chart price movements of the stock. They look for patterns and formulate a game plan to make money off of the trends. Using PVT is a way for savvy traders to determine if a stock is a good buy or a bad buy.
There are two common charts used to determine the prices of Nasdaq penny stocks. The first is the moving average convergence/Divergence, or MACD, which is the most widely used chart in stock trading. This uses moving averages, or monthly data to give a daily depiction of a stock’s price movements. Many investors like this type of chart, because it is easy to read and understand, and can give them valuable insight into stocks future potential.
Another popular method of tracking Nasdaq penny stocks is the daily performance of the composite of the opening and closing stock prices. OTCBB stocks are traded much differently then standard Nasdaq stocks, because they trade throughout the day instead of during opening and closing. Because of this difference, the composite price of the stock prices will often act as a barometer of the company’s performance. When the composite price of the stock prices move together with a company’s stock prices, this gives the trader a good indicator of the health of the company and its future potential for profit.
Finding a good stock broker that offers low float trading is essential if you plan on investing money into Nasdaq penny stocks. Most traditional banks and brokerage firms require that the trader have cash available in order to trade. The high level of liquidity of these types of trades makes it impossible for a broker to provide a trader with free trading capital. As such most new investors choose to begin trading small cap stocks with a broker that provides a low float ratio to help spread the risk of losing a client’s money when they trade.