Many great companies once started small – trading for less than £1 per share. Those stocks are called penny stocks. How to pick penny stocks? Are there things you need to know before trading on penny stocks? Read on to find out.

Defining Penny Stocks:

Penny stocks are stocks with lower price tags and relatively small market capitalization. These stocks typically have a share price below a certain threshold, often defined as £1 in the UK.

Penny stocks are often associated with smaller or emerging companies and can be more volatile than stocks with higher prices. While they carry higher risks, they also present the potential for substantial gains, making them an intriguing option for investors seeking opportunities for growth.

Picking Penny Stocks:

Thorough Research:

Conduct comprehensive research on potential penny stocks, including analyzing financial statements, industry trends, company news, and any available historical data. Consider factors such as revenue growth, earnings potential, competitive positioning, and the company’s overall business model.

Risk Assessment:

Understand the risks associated with penny stocks, including liquidity risks, price volatility, and potential scams or manipulations. Diversify your investments and avoid putting all your funds into a single penny stock to manage risk effectively.

Fundamental Analysis:

Evaluate the fundamentals of the company, including its balance sheet, income statement, and cash flow statement. Look for signs of financial stability, profitability, and potential for future growth.

Technical Analysis:

Utilize technical analysis tools to assess price trends, support and resistance levels, and trading volumes. This can help identify potential entry and exit points for your penny stock investments.

Finding Reputable Brokers:

To buy penny stocks in the UK, it is crucial to find a FCA-regulated broker.

The Financial Conduct Authority (FCA) in the United Kingdom is a regulatory body that oversees the conduct of financial firms to ensure the fair treatment of consumers and the integrity of the financial markets.

By choosing an FCA-regulated broker, investors can have confidence in the broker’s credibility, financial stability, and commitment to upholding regulatory standards. It provides investors with an added layer of protection and recourse in case of any disputes or issues that may arise during their trading activities.

Fortrade, for example, is a reputable broker authorized and regulated by FCA. Choosing such brokers helps investors to trade with peace of mind, knowing that their interests are safeguarded by a trusted regulatory authority.

UK Stock Exchange Trading Hours:

The London Stock Exchange (LSE) serves as the primary marketplace for trading equities, bonds, exchange-traded funds (ETFs) in the UK. The trading hours for the LSE are typically from 8:00 a.m. to 4:30 p.m. GMT. However, it is essential to note that there may be pre-market and after-market trading sessions available through certain brokers or alternative trading platforms. Consult your broker or the exchange’s official website for precise trading hour details.