Especially if you are new to trading, a casual trader, or trying to trade on a smaller budget you may be attracted to penny stocks. These are stocks priced below $5 by definition that can seem like a good way to grab a bargain.
With DEGIRO penny stocks can be traded though it depends on the exchange they are listed on. From our full DEGIRO review you will know that the broker offers a huge number of exchanges on which you can find penny stocks.
Here we will take a closer look at penny stocks, how to find them, and if they really are a good bargain.
Table of contents
DEGIRO penny stocks: are they available?
The availability of penny stocks through DEGIRO depends on the exchange where they are traded and if this is offered by DEGIRO. Some publicly listed stocks that may be considered penny stocks are certainly available. With that said, American Pink Sheets and the US Over-the-Counter (OTC) markets are not made available.
DEGIRO penny stocks: where can you find them
Once you have opened your DEGIRO account you will need to do some research to help yourself identify suitable and cheap stocks that may fit your trading needs.
A great place to start for this would be taking a look at the full list of available markets with DEGIRO. Here you will notice that more than 50 exchanges in 30 countries are on offer, so you should have plenty of choices.
Here we will guide you through an example on how to find penny stocks. Images are just for demonstration purposes, the share we select is a random pick and should not be taken as investment advice.
Step 1 – Find the share you wish to trade
The very first step is of course to find a suitable share you would like to trade. The Finviz stock screener is an excellent starting point for helping identify stocks that fit the bill. This database can help you quickly and easily sort and compare stocks to buy.
Once you have opened the platform it is as simple as clicking the screener tab and applying the price filter “under $5” which matches the definition of what can be considered a “penny stock”. You can also add further filters here depending on your need such as “average volume” over a certain amount. This one can be helpful as with too little volume you may find it hard to match and execute your trade.
Once you have identified the stocks you like, you can check the ticker code which you can then input in our DEGIRO search bar.
Step 2 – Open the DEGIRO platform
As mentioned above, once you have completed your research and selected a couple of stocks you like, you can then log into your DEGIRO account and search for the stock in the trading platform as shown by the image below.
If you don’t have one yet, you can open a DEGIRO account by following the link (Investing involves risk of loss).
With the ticker code from before entered, the stock should pop up and you simply need to click the name to open it.
Step 3 – Place the order
You should now be ready to place your penny stock order. On the asset page which you went to in the above step, you should now see two buttons, green for buy, and red for sell. Once you are ready and hit the green button, you will be presented with a small menu of options as highlighted below.
Here you can enter the order type, price you are willing to pay, and the number of stocks you want to buy. This will then present you with the total amount due and you can set if your order should expire at the end of the day, or stay open indefinitely until executed at your set price or not.
When you are ready you can click the blue button “Place order”. A final page will appear when you can run over everything to make sure the details are right before confirming and having the platform execute the trade.
DEGIRO penny stocks: London Stock Exchange with GBX
A term you may come across when trading UK shares on the London Stock Exchange, GBX is short for Penny Sterling, or £0.01 since this exchange trades in pence instead of Pounds. All this means is that where you see a stock at 100 GBX, this is equal to £1 and so on with higher values.
The London Stock Exchange advantage you’ll get with DEGIRO
When trading you have to consider not only the shares costs but also the Exchange Connection Fee. This is an annual fee that must be paid for each exchange you use. With the London Stock Exchange though, there are no additional fees. This is a good money saver, especially for newer, and casual traders.
Why trading Penny Stocks is risky
You may think the fact alone that the stock is cheap makes it less risky. This is not the case as we will see in the example below:
Let’s say you buy 10 shares of a US penny stock with a value of 0.20$ this will make for a cost of $2. Then you add in the opening and closing position fee we have to consider another $1 ($0.50 each). This makes the total transaction cost $3.
You will see this leaves us needing a big gain of at least 50% to the upside to cover our position since 0.20$ + 50% = $0.30 for a total of $3.
Given then that the US market had an annual average growth rate of 10%, you would need your shares to perform well above the market average to cover the investment. The solution is to buy more!
Buying more and opening a larger position makes the opening and closing commission, which is actually very low, irrelevant. For example, 500 shares valued at $0.20 will be $100 and the $1 total fee has minimal impact.
This leaves us then in a position where small movements in stock price though can have a big effect. If the shares fall to $0.18 (2 cents) you will lose $10 (10% the investment). This is a relatively small fall, but a proportionately big loss. Penny stocks or small-cap stocks also tend to be considerably more volatile in trading.
DEGIRO Penny Stocks FAQ
Can you trade penny stocks on DEGIRO?
This will depend on whether or not DEGIRO offers the exchange that the products are listed on. What is certain is that access to American Pink Sheets or US Over-the-Counter (OTC) markets are not available.
Is it illegal to buy penny stocks?
Penny stocks are legal, but they are often manipulated. Penny stocks get their name because of their low share price. Any stock trading below $5 a share is generally considered a penny stock. A low share price can mean several things about the company situation but in any case, you should be sure to research all you can before making a buy.
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