What are penny stocks? Why people are interested in such stocks that seem so inexpensive? In official terms, penny stocks are the shares that are offered in financial market for people to buy it, but this type of stocks are not traded in any formal stock exchange rather penny stocks are available on a dealer network like over the counter known as OTC. Penny stocks are the shares that have made significant capital gain to be publicly traded but not make sufficient to be on larger well known stock markets
The main reason behind why penny stocks are available over the counter is that specific penny stock companies have comparatively small turnover and can’t fulfill the financial conditions of the formal stock exchanges. Penny stocks are not usually listed on any formal exchanges, as they are traded by some dealers who transact over the phone or on online network.
Penny stocks are priced between dollar one to dollar five a share. Sometime many people get confused with penny stocks and listed stocks that recently have fallen price less than dollar 5 a share due to market trends. If you are not aware of a particular company is a listed company or a penny stock company, find out company’s stock code. Company name having code OTC or OTCBB, generally trade over the counter. Click here to read more on trading penny stocks through good research.
Trading penny stocks is more like gamble; if you don’t aware of risk involved in transaction of penny stocks, don’t go for any kind of online trading. The basic formula is simple, you just need to make judgment that your invested money can give you worthwhile returns or not. Trading penny stocks is a great way to enter in stock market; they have value of less than a dollar or may be even lesser. Penny stocks are offered by new small scale companies. These companies offer such stocks because they are seeking funds for expansion, sometime for start-up or may be for basic operations.
For investors who think that penny stocks are easy method of earning big profits, this is not entirely true. Financial gains are possible, but to make them happen, one should be ready to take risks. Price of penny stock fluctuates very frequently, such shares are majorly depends on market promotion and speculation. Prices may go up as and when interest rates go down or vice versa.
Penny stocks are known by different names such as pink sheets. Although they are risky in nature; but can be proved very profitable for professional trader or investor. They have some short term benefits over the tradition stocks. Penny stocks are cheap in nature, even they are recommended for those people who want to buy the cheapest stocks.
Stock market analysts do not cover penny stocks; this makes penny stock companies to dependent on promotional campaigns to spread the information for their stock. Penny stocks are the hot stocks of financial market. New emerging companies that are addition for their industries can become the right
picks for professional investor. Penny stocks trading may involve lots of fraudulent activities so be careful.