Penny Stock Introduction

Have you ever learned about penny stocks? What are they and why are they not as popular or as generally talked about not to mention, nor as widely traded as the other regular stocks? To help you, here is penny stock introduction, and pros and cons of their investment.

To be a successful investor and make big buck from small cap stock investment, you must know the good and the bad of small cap stock investment and collect more information especially if you are a new investor. When you have this information, you will have abundance of great opportunities to enjoy one of the more risky adventures in stock investing.

Penny Stock Introduction under Review:

Different people define small cap stocks in different ways, but there is no single accepted definition of these stocks. In simple words these are Low-priced issues, often very speculative, selling at less than $1 per share.

However Securities and Exchange Commission has modified the concept of these stocks and considers them stocks not more than $5 per share. Regular stocks are traded in the conventional stock markets while penny stocks are traded over the counter through the services of Pink Sheets or Over the Counter Bulletin Boards (OTCBB).

Small cap stocks have limited liquidity, their stock prices can quickly change by increasing rapidly or crashing suddenly without any warning or reason. Moreover there are always the chances of frauds as these stocks can easily be controlled and manipulated by third parties, the insiders, even the market maker. They have low liquidity so it often also results in difficulty to find buyers of penny stocks.

On the other hand many traders may like to trade small cap stocks, because of their very low per share price, and they have potentials of big growth. Gigantic returns can be generated from small cap stocks in a very limited time, in few days or even in few hours…BUT…. they are also considered high risk investment.