Pennystocks


Many people who invest in pennystocks hope their initial small investments will grow to massive fortunes. They are looking to find the next Microsoft or Google. See if pennystock trading is the right investment for you.


One method to find undervalued pennystocks is to use a pennystock screener.



Description of a pennystock can vary. However, a stock with market value around $50 to $300 million is considered a micro cap. A stock valued below $50 million is considered a nano-cap. Pennystocks usually trade under $5. Pennystocks do not trade on the major exchanges. They are traded on the pink sheets or over-the-counter bulletin board (OTCBB).


Pennystocks are stocks that is traded for less than one dollar per share. It is also a term used for stocks traded at less than five dollars per share, in some cases. Pennystocks are mostly stocks of small cap companies, though this does not mean that all small cap companies only deal in penny stock. They are worth a few million dollars in net tangible assets.


Pennystock investing is extremely risky when compared to stocks traded on the major exchanges. Here are the reasons why they are risky.


1. No History


Many of these companies are recently formed. They do not have sufficient history or records. Not having sufficient records makes it very difficult to evaluate the potential of this company.


2. Not enough Information


These penny stock companies are not required to file with the Securities and Exchange Commission. This makes it hard to find any information concerning the company. Even if information is provided, it most likely is not from a reliable source.


3. No Standards


Pennystocks listed on the OTCBB or the pink sheets are not required to meet any standards to be listed on the exchange.


4. The Lack of Liquidity



Pennystocks typically have low liquidity. Getting buyers for them can be a problem. Various scrupulous traders will take advantage of the low liquidity by hyping their penny stocks and dumping them when the price goes up.


As stated before, the price of pennystocks can be easily manipulated due to their low liquidity. This can be done by fraudulent traders hyping their stocks on online forums and discussion boards. Some penny stock companies deliberately get people to hype and suggest their stock. So be careful of any recommendations from these online forums and always do you own research.



Pennystock investing can be very profitable. There are many opportunities in penny stocks. However, trading penny stocks can also be very risky and might not be appropriate for everyone. You need to do your research and understand if penny stock trading is right for you.
























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