Penny Stocks Knowledge

What are Penny Stocks?
A security is often considered a penny stock when its not listed on one of the Major exchanges. The definition by the SEC considers a security a penny stock if it trades below $1 regardless of what exchange it's on. A penny stock is also referred to as a micro cap or nano cap stock. Penny stocks can be very high risk to include limited liquidity, fraud and lack of financial reporting. Educating yourself in all areas of penny stocks is a must. Trading penny stocks can by high risk and all attempts should be made to be aware of the risks involved. Penny Stocks are usually Over the Counter Bulletin Board Securites. These are companies that are either just getting started or companys that were successful at one time and have been downgraded to a penny stock because of it's low stock price.

Most Penny Stocks are very Volitile. This means the stock fluctuates in price very quickly. This can happen because most penny stocks have a low float, meaning a low number of shares on the open market. Sometimes these stock types are extremely manipulated by groups that purposely try to effect a stock price by causing hype. This is illegal, but it happens. These groups buy huge amounts of stock, causing the price to go way up and it creates hype. They will sell off at high prices and if you fell into the trap you will be left with a big loss. It's not uncommon for penny stocks to range from .05 cents to .30 cents in 1 day. That's a 600% jump! Just make sure that the stock isn't rising over hype. It's a good idea to thoroughly research all stocks. However, there will always be risk no matter how much you research a stock.

Just remember, penny stocks are risky! Meaning, you could make a lot of money or you could lose a lot of money. PennyStockList.com suggests you to consult with a financial broker or advisor when making any stock trading decisions.