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What are Penny Stocks?

Millions of shares of Penny Stocks are traded around the world. If you have the right information on these stocks, you can make a very large amount of money if you invest them. But what is a Penny Stock exactly? Most Penny Stocks are traded on a minor market instead of one of the well known major markets like the NYSE or NASDAQ. There are still many stocks that trade just a few dollars on these major markets however.

Penny Stocks primarily trade on the OTCBB market and the pink sheet electronic quotation service. There are different definitions about how much a penny stock needs to trade under. Some say under $10, some say under $5, some even say under $1. Bottom line is that a Penny Stock is an affordable opportunity allowing investors to get involved in the market. These are a great beginner’s area for new investors.

Many big caps trade for over $30 a share limiting you to only buying a little amount of shares. Compare this to a penny stock trading at $0.30. You can get a lot of shares and not have to wipe out your trading account. Often times investors will jump into Penny Stocks to make profits faster.

Penny Stocks can be very volatile and can see gains as much as 400% in just one day. Of course this is also dangerous because as fast as a Penny Stock might go up, that’s as fast as it might come down. These stock are extremely profitable only if you know what you are doing. There are many tools online that can help you with your Penny Stock Trading that include software and free newsletters.

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