Beginner investors get their feet wet by first swirling their toes in penny stocks. As implied by the name, penny stocks are share held by companies with a low trade price; usually $5 or less. New investors can easily get hooked by penny stocks because they require a small percentage of capital investment. The low share prices enable investors to purchase thousands of shares and potentially earn a substantial return (the reverse is true as well).
Seasoned investors generally stay away from penny stocks because they are risky and highly speculative. Penny stocks have small market capitalization, limited disclosure, and large bid-ask spreads, limited following and lack liquidity.
If you want to get into penny stocks, take the following steps:
Signup for Penny Stocks Newsletters" and Get Alerts:
Penny Stocks newsletters help you stay informed about current and upcoming trends in the penny stock market. These newsletters are vital tools for retrieving up-to-date information on buy/sell alerts and stock prices. Some newsletters have chat rooms, community forums and valuable training materials. They will be your ticket into penny stock market.
Seasoned investors generally stay away from penny stocks because they are risky and highly speculative. Penny stocks have small market capitalization, limited disclosure, and large bid-ask spreads, limited following and lack liquidity.
If you want to get into penny stocks, take the following steps:
Signup for Penny Stocks Newsletters" and Get Alerts:
Penny Stocks newsletters help you stay informed about current and upcoming trends in the penny stock market. These newsletters are vital tools for retrieving up-to-date information on buy/sell alerts and stock prices. Some newsletters have chat rooms, community forums and valuable training materials. They will be your ticket into penny stock market.
Conduct a Penny Stock Search:
Mainstream stock exchanges such as the NASDAQ and NYSE have minimum bid price requirements of $1 per share. Otherwise the stock will be delisted. Penny stock traders therefore turn to “Over The Counter Market”. OTC Market Groups arranges securities into ranked marketplaces in order to reflect the degree of investor engagement, disclosure and integrity of operations.
Narrow Your Trading Candidates:
After you understand where penny stocks can be traded, determine which stocks you’d like to trade. You can use stock screening tools to find stocks listed at less than $1. Narrow this list down according to your risk tolerance and strategy.
Understand the Risk:
Penny stocks are infamous for being risky. Many of the companies listed are small-cap stocks that are vulnerable to serious volatility. Liquidity is a genuine concern amongst penny stocks. It is definitely not uncommon for investors to wait around for weeks in the end for enough demand and supply to be generated so that they can exit before serious price fluctuations occur.
Mainstream stock exchanges such as the NASDAQ and NYSE have minimum bid price requirements of $1 per share. Otherwise the stock will be delisted. Penny stock traders therefore turn to “Over The Counter Market”. OTC Market Groups arranges securities into ranked marketplaces in order to reflect the degree of investor engagement, disclosure and integrity of operations.
Narrow Your Trading Candidates:
After you understand where penny stocks can be traded, determine which stocks you’d like to trade. You can use stock screening tools to find stocks listed at less than $1. Narrow this list down according to your risk tolerance and strategy.
Understand the Risk:
Penny stocks are infamous for being risky. Many of the companies listed are small-cap stocks that are vulnerable to serious volatility. Liquidity is a genuine concern amongst penny stocks. It is definitely not uncommon for investors to wait around for weeks in the end for enough demand and supply to be generated so that they can exit before serious price fluctuations occur.
Investing in penny stocks is a gamble. It is a risk worth taking if you understand all the variables involved. To get started, open a brokerage account, conduct a penny stock search, narrow your company choices and understand the risk. By taking these steps, you will be set up to get into the explosive world of penny stocks.
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