Marijuana Penny Stock Trading brokers are now becoming cheaper thus making it easier for retail investors to invest their savings. It can be frustrating to find a good trading platform and depends on the type of stocks you plan to trade (whether pinks sheets or OTC), the amount of capital available to you, and how frequently you trade. Each week I receive dozens of emails inquiring about which brokerage to use but it is a challenging question to answer since it involves multiple factors.
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3 Important Things to Look Out For
Surcharges: Depending on your broker, most add surcharges to shares less than a dollar. TradeKing charges an additional 1 cent for every share below $2 meaning that if you buy 5,000 shares it will cost you an additional $50. If you don’t keep close watch on those small charges they can easily add up and eat into your potential profits. You should choose a brokerage with a flat commission rate or one that offers sizeable discounts on large orders. For instance eTrade, Charles Schwab, and TD Ameritrade all offer either flat fees or massive discounts and no hidden fees.
Stock Trading Restrictions: You should be capable of trading shares through an online platform and be wary of firms that force you to make your trades over the phone. Some brokers have restrictions in place especially with regards to issues such as short selling your penny stocks.
Volume Restrictions: The number of shares you are ideally allowed to trade is unlimited.
Different brokers have different account minimums, trade restrictions, commissions, and fees. Other important considerations include market maker routes, executions, software/trading platforms, and the quality of customer service. The greatest hindrance is not having sufficient starting capital and brokerages don’t like to deal with poor traders. If you live outside the U.S. in a country such as the U.K. or Australia, finding a penny stock friendly broker will be harder.
Marijuana Penny Stocks have had a negative reputation over the years and for good reason. The vast majority (90%) of those companies represent poor investments that are not something anyone would like to put in a 401k. Most of them are simply shell companies created with a sole purpose of ‘pump and dump’.
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Etrade is an obvious top choice overall since it charges a flat fee and offers outstanding trading software. Currently, Etrade has a promotion where traders with accounts of over $10,000 can trade free for the first 60 days.
The minimum deposit for a cash account is $500 and $2,000 for a margin account. Discounts are offered on large orders and penny stocks have no surcharges. Great research investment tools are available and the executions are very fast.
It is best suited for traders that trade frequently due to the tiered pricing structure, meaning that it is not recommended for non-active investors since they will have to pay additional commissions. The customer service is below average when compared to others while 24/7 phone and email support is available. The basics of the stock market are taught through video lessons.
The major limitation is that it does not accept traders from some countries. It is currently Tim Sykes favorite broker.
Interactive Brokers might have poor customer support but are still your best bet if you plan to short shares priced below $2. They have some of the best borrows for Cannabis Penny Stock Trading even though shares for shorting go fast.
Fees are levied for canceling or modifying an order and a monthly inactivity fee of $20 is charged. Unless you are a day trader, the commissions can be expensive. Interactive Brokers traders comprise mainly of massive institutions and high net worth individuals.
Unlike Etrade, Interactive Brokers accepts international traders and does not discriminate against particular countries.
This broker has been operating for more than 40 years. In 2009, Ameritrade took over Thinkorswim. The broker has a solid trading platform with helpful charting tools as well as tutorial options to help you get started. In spite of this, their trading platform has experienced minor technical errors in the past leaving those customers that were looking to exit trades quite angry.
TD Ameritrade has no inactivity or monthly fees making it perfect for long term investors. Trade execution is great and the borrows are decent if you would like to short penny stocks. The broker offers free paper trading demo, which is great for beginners looking to test strategies and get a feel of the market.
The main drawback of TD Ameritrade is the $9.99 fee, which is much higher than that charged by other brokers. It can be argued that by charging more than the competition they are able to offer better customer support or it could be that they are greedy like the rest of the players on Wall Street.
One of the best things about SureTrader is the chance to bypass the pattern day trader rule since it is located offshore in the Bahamas. The pattern day trader rule is a rule set by the SEC that does not permit traders with accounts below $25,000 from executing over 4 or 5 day trades over a 5-day business period. This can be quite annoying and makes it hard for traders to grow their accounts fast but still protects day traders from losing money.
Recently, SureTrader’s CEO, Guy Gentille was indicted by the SEC for manipulating penny stocks. It should be noted that while SureTrader was not involved in the schemes this scandal has tainted their reputation. Hearing such news about a company’s CEO would make any trader feel uneasy and for this reason, trading over $2,000 with them is not recommended.
The account minimum is $500 and the charges are $4.95 for every trade for up to 1,000 shares but an ECN fee of .003 is charged for routing. The leverage currently offered is 6-1 and future plans are to increase this to 20-1.
The information pertaining to this company available on Google is very limited and while the company was established in 2000, it does not even have a Wikipedia page.
ChoiceTrade is better suited to OTC stocks and only costs $7 for every OTC trade. The broker has a volume surcharge of 1 percent for any trade over 500,000 shares. There is no account minimum but an inactivity fee of $30 is charged for every quarter.
However, this is not how it works. Patience is needed and you should paper trade for not less than 3 months. Keep in mind that you need to learn before your earn. Once you are ready, it is advisable that you start trading with not less than $2,000. Interactive Brokers and Etrade are the top 2 online penny stock brokers with great reputations.
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Before I can tell you the advantages and disadvantages of trading futures, it's important to understand how it differs from trading stocks.
When you buy a stock, you own part of the company. That is, you share ownership with other investors. That's why we say you buy shares.
Trading futures, on the other hand, requires a contract to buy or sell the commodity in the future. That's why they are called futures.
You can buy or sell those futures contracts as easily as trading stocks. For that matter, you don't even have to lay out the money. However, you do tie up resources in the form of margin.
The problem is that the margin held is nowhere near the actual value of the commodity if you were to purchase it. This is known as the Notional Value. It's calculated as the market value multiplied by the leverage.
Okay, I just threw you two more terms that need definition:
The market value is the price that traders are willing to pay. In general, this is determined by supply and demand. The leverage is the number of units of the future index.
For example, the E-Mini SP& 500 Futures has a leverage of 50. As of this writing it's trading near a market value of 2100. Multiply that by the leverage (50) and you get $105,000. That's the Notional Value of the E-Mini S&P.
As you can see, if you buy one E-Mini S&P contract, you are controlling $105,000 in value. However, unlike stocks, you don't own it. You just have a contract to buy or sell it, depending if you went long or short.
Low Margin Required
What did you actually pay? That's known as the margin that the broker requires you to hold while that trade is active. It varies, but it's around $5,000.
If you bought a stock valued at $105,000 you'd have to pay $105,000. If you used margin, it would still require a payment of half of that. The advantage with futures is that you only tie up a small fraction.
However, the disadvantage is that you need to know what you're doing. If you let a Futures trade get away from you, you are liable for a huge investment. Remember, it's a contract.
That's why traders buy and sell Futures contracts without actually ever buying the commodity.
What's the disadvantage?
When trading futures you have to apply your due diligence in knowing the notional value of the future contract.
If you don't pay attention to the Notional Value, and a trade keeps going against you and you don't close the trade at a small loss, it can get out of hand.
You could end up losing a lot of money in a short time. If you reach the limits of your margin, your broker will close the trade if you don't. That means you've been taken out of the market and you may not have the resources to get back in. Game over!
For this reason, you need to stay small. Don't add to bad trades hoping to lower your cost bases. Rather, just admit that you were wrong and you'll be around to play another day when an opportunity arises.
There are many, and these are the reasons why I love futures over stocks. The rest of this article will briefly list the advantages with trading futures.
Trading Long and Short
Going short with Futures is just as easy as going long. It's just a matter of deciding in which direction you think the market is headed.
No Day Trading Limits
There is no day trading limit with Futures. Stocks can only be traded three times in a day before the IRS considers you a day trader. Futures can be bought and sold any number of times in a day, allowing one to take quick profits and benefit from intraday swings.
No Wash Sales Penalties
The IRS does not penalize you for taking a loss and reentering the same trade within 30 days. When this is done with stocks it is considered a wash sale and you lose the benefit of deducting the loss unless you can carry it forward to a future gain on the same stock.
The reason why it's not penalized for Futures is because Futures pricing are recorded as Marked to Market. I won't get into that here. You can always do a Google search for the term if interested.
Trading 24 hours
Futures trade nearly around the clock, except on weekends and short periods in between for exchange record keeping.
European Style Trading
Stock Options follow the American Style that can be exercised anytime. When trading stock options, one needs to be careful to avoid being exercised if the option is in the money.
Most Futures Options trade European Style, which can't be exercised before expiration. There are some exceptions, especially with weeklies. That's beyond the scope of this article though.
Futures and Options on Futures are treated according to IRS Section 1256. That provides a tax advantage since 60% of all gains are considered Long Term. This is true even if held for just a few seconds.
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So far as I can tell, President Donald Trump has done little to change the circumstances that led him to declare in April 2016 that the U.S. was headed for "a very massive recession." His promise of "big league" tax reform has been described by a lobbyist as "a big nothing burger."
Trump's opinion as a candidate could be of importance to you as an investor. He said last year: "It's a terrible time right now to invest in the stock market."
If Trump was right then, his conclusion would seem to be even more valid now.
Today's cyclically adjusted price-to-earnings ratio, or CAPE, is 29.27, as compared to an already high 25.92 in April of last year when Trump warned that the market was dangerous.
Under sane and sound conditions, the performance of individual stocks is determined by the execution of their business plans - not by political authorities or the unelected mandarins at the Federal Reserve.
As they talk about "draining the swamp" of crony capitalism, politicians should not be manipulating your stock portfolio. But they are. Or at least they are trying.
I have made a hobby of studying past stock market manias looking for clues to help you get a better view of when the current bubble may end, and the likely consequences. As you know, we have not experienced sane and sound conditions for years.
Quite the contrary. As you are aware, we are in the midst of the biggest stock bubble in American history. In all probability, it is the biggest stock bubble in human history.
Some might suppose that the Wall Street market crash of 1929 ended the biggest bubble ever. It was the first stock mania in the era of American hegemony. The Allied victory in World War I, in conjunction with the impairment of British financial capabilities, set the stage for euphoric optimism in the Roaring Twenties.
President Herbert Hoover, who was praised by economist John Maynard Keynes as the only person to emerge from the Versailles Peace Conference with his reputation enhanced, was widely despised for causing the Great Depression. It is now forgotten that the worldwide depression supposedly started by Hoover's inability to head off the stock market collapse of 1929 was already underway as early as 1927.
Commodity-producing economies on the periphery, such as Argentina, Australia and Brazil, along with troubled European economies, notably Germany, had already sunk into depression.
The excess capacity in commodity production, stimulated by the breakdown of trade in World War I, depressed prices for producers.
This commodity depression was reflected in the crash of the London stock market, which mainly capitalized the operations of hard and soft commodity producers throughout the British Empire, and preceded Wall Street's October 1929 plunge by a month.
An Inescapable Bubble
Weakness in commodities is likely to precede the next big crash. Of course, that opens the door to trouble at almost any time. Industrial commodities, particularly iron, copper and oil, have been chronically weak.
Unlike the run-up to the 1929 crash, the current weakness in commodity prices is mainly attributable to the opening of the Chinese economy, in conjunction with the quantitative easing policies of the Fed and central banks in other advanced economies.
Those actions resulted in the lowest interest rates seen in 5,000 years! Add in the demand from China, ramped up by promiscuous credit expansion, and you have a recipe for massive commodity expansion and overcapacity.
China consumed more cement between 2011 and 2013 than what was used in the United States in the entire 20th century. Similarly exaggerated demand for iron, copper and other industrial commodities underpinned huge expansions of capacity and debt levels.
A recent report by Andrew Brown, partner for macro and strategy at ShoreVest Capital Partners, concludes that it is China's turn to deflate its credit excesses. These are arguably the most extreme in history. China created debt equivalent to 139% of its gross domestic product between the first quarter of 2009 and the third quarter of 2014 when Chinese growth peaked. This debt explosion was far in excess of the debt created in other major credit bubbles around the globe.
China's excess credit, as measured by the Bank for International Settlements, is equivalent to about $3.1 trillion. The bubble is unquestionably a feature of current stock markets.
A Crash Is Coming
Once a bubble has been inflated, I know of no example where one was calmly deflated, short of a crash. Of course, that doesn't mean that everyone must be equally affected.
Note that some experts have suggested that the late 1990s dot-com boom was a bigger bubble than today because the price-to-earnings (P/E) ratio for the Nasdaq in 1999 was higher. As true as that statistic is, it paints a false picture. The reason?
Over the last 18 years, the powers that be have tweaked accounting standards to permit companies a greater latitude in declaring fanciful earnings. The result?
If you adjusted the earnings of S&P 500 companies to reflect the generally accepted accounting principles in force in 1999, today's earnings would shrivel by at least half.
That would make the market about two times more expensive than it already is. So a P/E of 29 today, using 1999's accounting standards, would be 58 or higher!
Prudence suggests backing out of unhedged passive long investments in the U.S. market.