| Stock Trading is a much regulated market; companies | | | | less than $25 million |
| are obligated to publish information about anything | | | | All those definitions can be and are used by investors |
| which could be of interest to an existing or potential | | | | or individual very loosely and sometimes on purpose |
| investor. Therefore finding information about large | | | | to confuse the novice investor. |
| scale companies is not hard and the regulators pay | | | | To confuse you even more there are many firms |
| close attention to the published information and who | | | | trading in a share price range of a few cents and at |
| is publishing the information. | | | | the same time have a market capitalisation of |
| For example the New York Stock Exchange has the | | | | hundreds of millions, on the other end of the scale |
| highest listing standards amongst the markets in the | | | | there are corporations trading Pink Sheets and the |
| world. Every company that meets those | | | | share prices can be $50 or more. |
| requirements signifies that is successful in the market | | | | Why would you want to trade in this high risk and |
| and is a leader in the industry in relation to business | | | | confusing markets of Penny Stocks, OTC or Pink |
| and investor interest and acceptance. The minimum | | | | Sheets? |
| requirements are number of traded shares, market | | | | The answer is simple: The rewards and yields can be |
| value, share value, and number of shareholders. After | | | | very high. |
| a company is listed it must continue to meet | | | | Do not start in this market, without research and |
| standards set by the exchanges. The company can | | | | most importantly you can afford to loose. Unless you |
| be delisted if it stops to meet the regulators | | | | are a real gambler it is not recommended to |
| requirements. | | | | mortgage your family home and invest the money |
| Starting 1913 companies who could not meet those | | | | on Penny Stocks. |
| stringent requirements started to inactively trading | | | | Why are there such high returns? |
| shares using a quotation system which was printed | | | | Just do your sums if you invest $10,000 and buy |
| on pink paper issued by the National Quotation | | | | some traditional blue chip company shares you can |
| Bureau this practise continued until the introduction to | | | | expect a return of approx 5 to 8%. In very simple |
| an electronic system in 2000. | | | | terms you could expect a return in a range of $300 |
| Those companies are usually start ups or very small | | | | to $1000 after one year. |
| and or geographically bound and try to raise money | | | | If you use your $10,000 and buy into an emerging |
| to develop a product or concept which is seen by | | | | company with a share price of $1. If the company |
| the large and traditional investors as too risky. Some | | | | becomes successful the share price could skyrocket |
| of those companies can even be bankrupt. | | | | to $2 or more and you have doubled your money. |
| Companies meeting some requirements are traded | | | | Equally if the company goes the other way you can |
| Over-the-Counter Trading (OTC). Those shares are | | | | loose all your money. |
| traded by using inter-dealer quotation system such as | | | | Therefore it is vital you can afford to loose and you |
| Pink Quote (operated by Pink OTC Markets) and the | | | | stick to your system if you set your mind you will sell |
| OTC Bulletin Board (OTCBB). Normally OTC stocks | | | | at $2 share price Sell, don't get greedy some of |
| are not listed or traded on any stock exchange. | | | | those small companies can double their value "over |
| However stocks quoted or traded on the OTCBB | | | | night" but also can vanish "over night". |
| must comply with U.S. Securities and Exchange | | | | Make sure you use a trusted and reliable system/ |
| Commission (SEC) reporting requirements. | | | | software or us a broker you trust. If you have the |
| The US Securities and Exchange Commission | | | | right market knowledge a good a system and |
| generally define Penny Stock Trading, as trading | | | | discipline you are on your way earning an extra |
| shares with a share price of less than US$5.00. Retail | | | | income. Once you are more experience you will |
| investors or the general public refer often to other | | | | diversify your portfolio and can afford to invest into |
| criteria's whilst other countries may define the term | | | | more risky trades and at the same time don't loose |
| without any reference to the US Exchange | | | | your family home. In particular always be suspicious if |
| commission definition. | | | | you are offered a "Free" trade. Why would any |
| Some of these other criteria's can include: | | | | broker offer you something for free? He is in the |
| Share being less than $1, and sometimes as low | | | | business to make money and you will always pay |
| as fractions of one cent | | | | either through hidden fees or up-front fees. |
| A market capitalisation of less than $50 million or | | | | |