Penny stocks are super high-risk investments that aren’t suitable for all investors. Then practice what you’ve learned with our free stock market simulation.
|vTv Therapeutics Inc.
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|Alliqua Biomedical Inc.
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|BioXcel Therapeutics Inc.
Penny stocks can also be called micro-cap stocks. While the latter are categorized based on their market capitalization, penny stocks are classified as such based on their price. A stock with a market cap between $50 and $300 million is generally considered a micro-cap. The SEC defines any stock under $5 as a penny stock.
WHAT ARE PENNY STOCKS?
Because these stocks are traded over-the-counter, there are a few added risks to consider.
They are not as liquid
Because there is a much more limited number of buyers and sellers in the OTCBB, penny stocks just aren’t as liquid. One way to remedy that is to sign up for a penny-stock service which will make finding trades much easier.
Less available information
There is much less information readily available for stocks traded OTC. It’s harder to make an informed decision about a company about which you know very little.
Penny stocks can be verily easily manipulated, sometimes illegally, to drive their prices up. These stocks attract many solicitors and scammers who trick unaware investors and make a lot of money doing so.
HOW TO INVEST IN PENNY STOCKS
Penny stock market
Penny stocks’ low prices mean that they are super volatile investments. Just a small change in the stock price would have a huge effect overall. This is both the allure and danger of penny stocks: High Risk, High Return . A risk-taker would be enticed to buy a huge volume of shares of a cheap stock in hopes of winning big if that price goes up a bit. This is usually the plan when buying penny stocks. Investors will scoop up tens of thousands, hundreds of thousands, even millions of shares of a stock that sells for very little per share. The idea is to get in quick and cheap, and get out fast and flush.
Many OTCBB companies are working crazy hard to climb their way up to the Nasdaq and NYSE status. Some companies on the OTCBB might be good quality, but penny stocks are just very high-risk investments and they aren’t suitable for all investors. If you can’t resist the lure of these micro cap stocks, at least make sure you do extensive research.
Where to Buy Penny Stocks
Penny stocks are often not traded on any major stock exchanges. Though the NYSE, NASDAQ and AMEX are home to some of the more established penny stock companies , they’re usually traded over-the-counter on the OTC Bulletin Board (OTCBB) and pink sheets.
HOW TO FIND THE BEST PENNY STOCKS TO BUY
Penny Stock Software and Tools
Here are some super helpful tools to use when buying penny stocks:
Penny Stock Tips
- Ignore penny stock success stories that are touted on social media websites.
- Sell quickly .
- Focus only on penny stocks with high volume (at least 100,000 shares a day)
- Don’t fall in love with a stock!!!
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