What Are Penny Stocks?
As defined by the U.S. Securities and Exchange Commission, penny stocks are securities issued by small firms, with values lower than $5 per share. Penny stocks aren’t literally worth pennies, although their values are typically pegged at less than a dollar. These equities are traded at the lowest end of the market price range.
Other types of stocks also fall under the definition of penny stocks, including equities of firms that have “microcaps”, or low market capitalizations. These stocks typically have market capitalizations lower than $300 million. You will also find penny stocks from private companies that do not actively engage in trading.
Why Trade Penny Stocks?
Penny stocks are an attractive alternative to other stocks for many reasons. Trading in penny stocks allows investors with modest capitals to purchase high volumes of shares at much lower prices as compared to other stocks. With stock market fluctuations, these stocks show large movements in price, meaning investors could see a significant profit.
In contrast, investors will have to wait for years for the shares in a typical startup to become viable and pay out high dividends. In most cases, investors aren’t even sure when — or if — their investments will pay off. This is why most people trade penny stocks.
Where Are Penny Stocks Usually Traded?
Penny stocks are usually traded on over-the-counter markets (OTCs). OTCs are subject to much fewer regulations as compared to other types of stocks, and trading is generally less formal. Penny stocks are typically traded on off-exchange markets where investors have access to lesser-known securities. Although these securities aren’t available on major exchanges, some of them do have high-profit potential.
Some regular exchanges do offer trading in penny stocks. But investors interested in penny stocks are usually better off with OTCs, which specialize in trading on such stocks on specific platforms. Stocks on these platforms are subject to fewer regulations and reporting rules as compared to stocks that are traded on major exchanges.
Bull or Bear Market….It Doesn’t Matter
Kyle Dennis’ new, 5 min strategy is poised to double account sizes weekly! “I got out of GE trade at 379% $0.16-$0.77, thanks Kyle!” Said client Lance P. Check out the free training that started it all. (View Free Training)
SuperNova Service Leading Clients to 5-Figure Profits Consistently
“BOOM!!! Booked another $13,985 in profits on my long position $VMNGF. Great report came out premarket. Thanks Jeff at SuperNova for teaching me to make $$$ in the market.” Said Todd V. Jeff Williams is helping transform small accounts daily. Don’t miss his free walkthrough. (Watch Now)
Jeff Bishop, RagingBull.com Co-Founder, “Trading My Strategy Takes A Few Minutes a Day!”
“Jeff, I have to say I was a little gun shy, but I bought the lifetime service (to Bullseye Trades) Friday night. First trade with your service…in LULU, 205 Calls at $4.70. (I) was going to be away from all internet connections for the next 3 days. It hit my sell price at $6.25 ;)” said James W. (Read More)