Penny Stocks Trading

A penny stock is a common stock that trades for less than $5 a share. While penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board or in the Pink Sheets, they may also trade on securities exchanges, including foreign securities exchanges. In addition, penny stocks include the securities of certain private companies with no active trading market. Although a penny stock is said to be "thinly traded," share volumes traded daily can be in the hundreds of millions for a sub-penny stock. Legitimate information on penny stock companies can be difficult to find and a stock can be easily manipulated.

Penny stock companies often have low liquidity, making it difficult to sell shares. In extreme cases, investors may encounter difficulty liquidating their positions. These days it is easy to find a large amount of information online about stock tips terms, it is important to note however that you need to ensure the validity of all information used to make any Investments, in order to reduce the risk of potential financial loss. The financial statements of a penny stock need to be checked before investing in a company from a list pre-chosen penny stocks. Financial statement will reflect the financial condition of the company. An investor should understand the business model and future prospects of a company. This kind of analysis will help in proper selection of a penny stock. In this crucial juncture, effective share tips have become the need of the hour.

The main characteristic of a penny stock is that it can move very quickly. Penny stocks can hit +1000% gains in very short time periods, or thay can drop 99% overnight. This is because of the small market cap (the value of the entire company) and relatively low daily $volume. Due to their small market caps and low daily volume penny stocks can be easily manipulated by pumpers and promoters. Any trader with enough money can go in and control the entire days buying or selling. A common trick is for a trader, or group of traders to buy large amounts of stock, then pump the stock on chat boards to try get the price higher, at which point they dump their shares at a profit.