Penny Stocks On Robinhood Are Easy To Find If You Know How To. Here’s A Quick Guide
Most people who buy penny stocks have heard of trading platforms like Schwab or TD Ameritrade. But what if I was to tell you there is a platform that can save you a lot of money? Introducing Robinhood.
What Is Robinhood & Can I Buy Penny Stocks With It?
Robinhood is a trading platform that offers commission-free trading to investors. This fact alone makes their platform extremely enticing to new investors as well as investors with small account sizes. You can trade options, normal equities, cryptocurrencies, and even penny stocks.
Robinhood’s platform is compatible on computers through its website robinhood.com, as well as mobile devices through its Robinhood app.
Making A Robinhood Account To Buy Penny Stocks
Robinhood offers 3 different types of accounts for investors. This includes Instant, Gold, and Cash. When you create your account, it “instantly” becomes a Robinhood Instant account. This account type is a margin account that allows instant deposits and extended-hours trading.
Robinhood Gold is a premium plan that has a starting cost of $10 a month. It enhances what you would get with an Instant account like bigger instant deposits and additional buying power. You can further increase your additional buying power by paying more per month and having a larger account size. For instance, when you pay $10 a month you can get an extra buying power of $2,000 with 0% interest. But if you pay $20 a month you can get an extra buying power of $4,000 with 0% interest.
The final account type is Robinhood Cash. It is the most basic account type you can have with Robinhood. Like the other account types, it offers commission-free trading but do not have access to instant deposits or instant settlements. You can downgrade to this account from an Instant or Gold account (more on this in “Tips And Tricks”).
How To Use Robinhood To Find Penny Stocks To Buy
Now that you have made your account, make sure to put funds into it. Only put in what you are willing to lose especially when it comes to finding penny stocks to buy.
Because Robinhood has commission-free trading, penny stock trading is a lot more profitable. This is especially true if you like to get in and out of a position quickly. A trader can afford to sell their stocks for a smaller percent gain because they no longer have to worry about paying $5-$7 on every trade they execute.
In order to find penny stocks on Robinhood you must understand what they are. A penny stock is any stock that is worth under $5. This is important information when searching on Robinhood for them. Also, Robinhood only has the ability to trade penny stocks listed on the NASDAQ or the NYSE. Here is the best way to locate penny stocks:
Step 1- Select “Show More” Next To “Popular Collections”
Step 2- Select The Sector(s) You Like To Trade
Step 3- Adjust The Price Range To $0-$5
Tips And Tricks For Trading Penny Stocks On Robinhood
Pattern Day Trader Rule
A common barrier small traders experience is not being able to trade more than 3 intraday trades a week. This is due to the Pattern Day Trader Rule which affects day traders primarily.
What Is Pattern Day Trade Rule On Robinhood?
One of the infamous barriers for day traders with smaller accounts in the pattern day trade rule. Some say it’s in place to prevent novice investors from losing all of their money. But others just feel it is something outdated. What is the definition of the pattern day trade rule?
When you buy and sell the same penny stock or option within the same day, that’s considered a day trade. With accounts valued below $25,000, these are subject to the Pattern Day Trade rule (PDT). As the rule states, for accounts of this size, you’re limited to making no more than 3-day trades in a given 5-day period.
Of course, your portfolio value may shift above $25,000 but it’s what the account looks like at the end of the day, which determines if you fall into the PDT rule or not. Keep in mind that if you have an “Instant” or “Gold” account, your value doesn’t include leverage. This means that if you are looking at the marginable (borrow-able) value in your account, valued over $25k doesn’t mean you’re not subject to PDT. It’s the total value of cash and securities that determines this.
[Read More] Learn How To Make Money With Penny Stocks
Also, if you are subject to the PDT rule, keep in mind the “5-day” time frame. These are trading days, not days of the week. Basically, if you place a day trade on Wednesday, another Thursday, another Friday, you’re day trade on “Monday” will market you as PDT. The result is that you’ll likely be restricted from day trading for 90 days (these are calendar days). The alternative is to bring your account up to $25k so pick and choose wisely.
A Solution To PDT?
However, Robinhood has a solution to this problem. It allows traders to downgrade their account type from Instant to Cash. By doing this, the 3-trade barrier disappears. But if you downgrade your account you cannot make your account Robinhood Instant again. Here’s how to downgrade your account:
- Step 1 – Email Robinhood’s support team at email@example.com, include your name and state that you would like to downgrade your account to a cash account.
- Step 2 – Complete all the requirements needed to downgrade (provided by Robinhood’s support team after you email them).
- Step3 – Once everything is finalized, you will receive another email from the Robinhood support team confirming the downgrade and that it may take between 5-7 business days.