Buying Penny Stocks

Buying Penny Stocks

Penny stocks are low priced stocks that can range in price from one cent to $5. Before you decide to start buying penny stocks, it is important for you to understand the potential risks and benefits of doing so. These stocks are usually not listed on the big exchanges like NASDAQ or the New York Stock Exchange. Most of them are traded on the Pink Sheets or OTCBB (Over the Counter Bulletin Board). Penny stocks sometimes are also referred to as micro-cap stocks.

Stocks that are not accepted for trade on the big exchanges can be traded on the OTCBB. If a stock is described as OTC (Over the Counter), it is traded between individuals who communicate via Internet and/or telephone. The Pink Sheets refer to a daily listing of OTC stocks which are not required to meet Securities andd Exchange Commission (SEC) requirements. The reason they are called Pink Sheets is that the publication was once printed on pink paper. .PK is the designation ending for a stock symbol that's listed on the Pink Sheets.

The problem with Pink Sheet companies is that they aren't required to register with the SEC, thus investors may not have access to as much background information. This makes trading these stocks riskier. Penny stocks can provide big gains or result in big losses. A couple of pennies can really make a difference one way or another. Investors should be prepared to accept loss and understand the high level of financial risk that's involved with investing in penny stocks. Trading penny stocks can be very exciting and can become fast paced. Some investors trade daily while others trade only a few times a month. You may also find penny stocks that you want to hold on to for the long term.

If you want to start buying penny stocks, you'll need to find the right broker. These days there are many online brokerages through which you can buy penny stocks. If you're going to be a do-it-yourself investor, you should consider signing up for a penny stock newsletter or recommendation service. There are certainly plenty of those out there, all of which claim to offer investors the best penny stock information. Make sure you do a little research before choosing which service you want to use. The right recommendations can turn out to be very profitable while the wrong ones can lead to financial loss.

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