A penny stock is a sock that traditionally sells for under five bucks. They are very cheap. Penny stocks are usually traded OTC (over the counter).
In America a penny stock refers top any stock traded outside the main exchanges i.e. outside AMEX, NYSE and NASDAQ. In the UK a penny stock is better known as a penny share and usually costs less that £1 or is a share for a company worth less than 100 million.
Obviously the lure of being able to buy a huge amount of stocks at such a low rice means that even the smallest increase in the stock price could equate to a large sum of money!
New investors are often strongly warned not to trade in penny stocks due to the volatile nature of the stocks themselves and the markets they sell in. A stock that is very low may have the appeal of fast easy money but it also runs the risk of being worthless should the company go into insolvency (their share price is low for a reason)!
Another major drawback to trading in penny stocks is the lack of liquidity. Often if a large number of penny stocks are bought and the price rises (giving a potential huge profit) it can be difficult to find a buyer immediately.
Should the price go up the lack of liquidity on the day you wanted to sell would be beneficial to you as selling them the following day would lead to even greater profit. However, should the price slip back down again all profit may be lost or a large percentage of it may be lost.
It is mostly due to this volatility in the penny stock market that leads most investors to stay away form this type of trading.
However, with the correct penny stock info and training it is possible to make a fortune form trading in these cheap markets.
Unfortunately, penny stocks are also open to fraud especially on the internet. Email spammers have been known to promote a certain penny stock via mass bulk spam-email. The spammer will buy huge amounts of penny stocks at a very low price and then promote the stock via email spamming.
Once other people buy the stocks the spammer sells his or her stock gaining on average between 4.9% to 6% on their investment - beware of email spam selling penny stocks or giving penny stock info!
If you wish to succeed in this market then you need proper penny stock info training!
About Me
- P Woodward-Jones
- California, United States
- My name is P. Woodward-Jones and I have been trading penny stocks for several years now earning my living from choosing the right stocks at the right time!