What Are Some Cheap Stocks I Can Practice Trading With?

The type of cheap stocks you can practice trading with depends largely on your account balance and your investing experience. Investors with account balances over $250,000 can trade higher-priced stocks than investors with low account balances, let's say below $10,000.

The key to finding the right stocks to trade lies in the risk-management part of your trading. Before you start trading, you have to find a risk level that you are comfortable with. How much of your total account balance can you risk on each trade?

For beginner traders, it is advisable to risk no more than 2-5% of your account on any one position. This means that traders with a $10,000 account can risk up to $500 (5%) on each position, while a trader with a $2,000 account can risk up to $100 on each position.

Therefore, you should find stocks that are appropriately priced for your risk level. If you are risking only $100 on each position, you should trade stocks priced up to a maximum of $5, and therefore you can buy 20 shares of the stock. Trading lesser price stocks such as $1 stocks will allow you to buy 100 shares and still stay within your risk profile.