| What are Penny Stocks | | | | of this stock and influence the price in one way or |
| Many of you might have heard of Penny Stocks also | | | | the other. |
| known as "Pink Sheet Stocks". Just as their name | | | | Advantages: |
| says, penny stocks are stocks that usually sell for | | | | The share price of penny stocks is so low that |
| less than a dollar a share and in some cases it may | | | | anyone with a trading account can afford to buy |
| be less than $5. These types of stocks are highly | | | | shares. Some brokerage firms might have you sign |
| speculative and risky propositions. Since these stocks | | | | the paperwork before they let you trade penny |
| of small corporations don't meet the minimum | | | | stocks. For example, with just $500 you can buy |
| requirements to be listed on any major stock | | | | 2,000 shares of $0.25 penny stock. the beauty of |
| exchange, they trade on Disadvantages: | | | | penny stocks is that With a small price fluctuation in |
| Penny stocks are trading so cheap for a reason. | | | | your direction, it can make you a boat load of money |
| Before the prices of these stocks influence your | | | | but this beauty comes with a hefty downside. If you |
| trading decision, do yourself a favor and ask this | | | | are caught off-guard on your trade, it can definitely |
| question, "Why are these stocks trading at pennies | | | | break you. |
| and not listed on major stock exchange?" If you can | | | | Not all is that bad with penny stocks. Some of the |
| answer this question convincingly then you do | | | | great companies of today once started to trade on |
| understand the risk associated with these stocks. | | | | OTCBB. However, it is essential that you do your |
| My Opinion: | | | | homework before you even think of purchasing your |
| These companies are losing money hand over fist | | | | first penny stock. There should be no room for error |
| with no revenues and earnings, poor management, | | | | with these stocks. |
| more debt than assets and a myriad of other | | | | My Opinion: |
| reasons. If you look at their price-volume action, it's | | | | If I really get interested in a particular penny stock, I |
| extremely volatile and can be easily manipulated. Yes, | | | | would keep it on my radar and watch it more closely |
| with little to no regulations on OTCBB stocks, prices | | | | for some quarters as it turns itself around with |
| of penny stocks can be easily manipulated. For | | | | strong revenue and earnings growth and make its |
| example, if a stock is trading at $0.50 and its average | | | | debut on major stock exchange. That would be a |
| trading volume is 10,000 shares a day, when | | | | sign that the company is making money and proving |
| someone comes in to buy 5,000 shares, that order is | | | | its credibility to trade along with big stocks. |
| likely to changed the dynamics of supply and demand | | | | Till then stay away from Penny Stocks!!! |