What Are Penny Stocks?

Investing Pennies To Make Dollars

Investing in penny stocks is can be both a wise investment practice and also an easy way to lose your money investing online.  This is because penny stock day trading is an extremely volatile market.  Unlike your typical stock investments, such as buying stock in GE or Microsoft, penny stocks move and change rapidly and often drastically.  A typical investor invests for the long term, looking for a decent percentage based return on their money.  The investor who dabbles in penny stock day trading is looking to make money in the present, often meaning today.  Penny stocks are considered volatile because they move.  Very often a penny stock can change in value several tens of a percent to even several hundred percent in a given day.  This is because they are low cost stocks, meaning what the name penny stocks implies: they cost from a portion of a cent in some cases up to several cents or even a couple dollars in some cases.  They are prone to being pulled or pushed with the overall movements of a given trading day or played by pump and dump schemes.  They can explode in value when multiple investors make large purchases of the same given stock in a single trading period.  Buyer be warned: these gains can be erased as quickly as they are won.

Where To Invest In Penny Stocks

Penny stocks are not traded on the regular markets such as New York Stock Exchange, or the NASDAQ market.  Investing in penny stocks, aside from being stock market savvy, means investing in what is referred to as the pink sheets.  The pink sheets are where stocks who are either new and of low value, or stocks which have lost significant value and have been removed from the major market trading indexes are traded.  Before deciding to jump into penny stock day trading you should educate yourself on stock market trading, penny stocks trading in general, and start slow.

When You May Want To Avoid Penny Stocks

If you are a first time investor or looking to make steady returns on your stock investment portfolio, penny stocks are probably not your best option.  Additionally, if it is your retirement money you are investing, or a large portion of it, steer clear of penny stocks and look for safer bets like blue chip stocks or mutual funds.  The reasons are simple: while you can make money very quickly, you can lose it even faster when investing in penny stocks.

Related posts:

1. What Are Pink Sheets?
2. What Is Over The Counter Trading?
3. What Is A Penny Stock?
4. When Is Day Trading Legal?
5. What Time Of Day Can I Trade?