According to Investopedia Inc. the penny stock market has seen phenomenal growth this past decade. From '94 to '03, the Over-the-Counter Bulletin Board trading volume increased an astounding 8900%, equaling a total of 63% of the NASDAQ and 78& of the NYSE share volumes. Many an investor has succumbed to their siren song.
It isn't hard to see why. Penny stocks are usually traded in lots of 1,000 and, as the name suggests, are bought (and sold) at incredibly low prices. There is no official price cut-off, and differences of opinion range from shares trading under $1.00 all the way up to $5.00. Others distinguish according to the market that they are traded on (the OTCBB, OTC or "Pink Sheets" for example). Yet others designate stocks as penny stocks based upon their market capitalization, or the value of each stock multiplied by the total number of outstanding shares. Regardless of the specifics, a general rule applies to all penny stocks ? they are a very high risk investment. Inversely, there's also the potential for staggering rewards.
But for every pot of gold at the end of the rainbow, there are thousands of cliffs and pitfalls along the way. The risks and dangers of penny stocks are many. In the stock exchange, there is a "best price" priority given to orders of a higher price than yours if you're buying or a lower price if you're selling. Combining this priority with what is very often low volume trading means there will be times when you find that your orders cannot be filled. In addition, there will be instances where you will have to settle for partial order fulfillment. And these are just dangers faced when your stock is performing well.
Penny stocks come from companies that are often less than credible, and unlike some of their more expensive cousins, can find themselves swayed by the power of rumors. Press releases, news stories, widespread whispers and even online forums and chat-rooms can be responsible for dramatically influencing their performance. This volatility creates two considerable challenges: 1) a high potential for schemes and scam artists; and 2) the inability to use traditional stock charting methods with any real effectiveness. It goes without saying that this isn't a market for the faint of heart.
Jennifer Gibbs is a successful freelance writer who lives in South Georgia with her husband and son. Be sure to check out her website for more great content, or to request a bid for your writing needs. http://www.jennifergibbs.com
Oswego taxi to Midway ..Are you paying any attention to your retirement savings? Do... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
It takes a total mental commitment to the task. It... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
Now where have I heard that before? I know. It... Read More
We learnt the following the hard way! If any of... Read More
You remember the story about the frog that was put... Read More
It seems that every day I turn on the TV... Read More
Did you know you can make money (and a lot... Read More
How do you invest? What do you really pay? At... Read More
A Guide to Using Stop Loss Orders Stop losses are... Read More
Recently I watched my favorite football team lose a vital... Read More
It looks like the market is ready to start up... Read More
Did you run out to buy that duct tape yet?... Read More
It depends on your level of understanding of the market... Read More
To begin, you might look at playing the stock market... Read More
Spread trading is a technique that can be used to... Read More
What account size do I need?How much money can I... Read More
What is leverage?Here is a definition of leverage from an... Read More
The gleam and bright lights of Wall Street lure in... Read More
Wall Street's watchword has always been diversification, but what does... Read More
I often play a little game with myself when I... Read More
Has your broker been calling you recently with the "great... Read More
The stock market has not been very kind to your... Read More
It is difficult to make money in a bull market,... Read More
shuttle from Midway Morris ..You'd have had to be living on a desert island... Read More
The thinking process of the brain relating to the... Read More
It looks like the market is ready to start up... Read More
The stock market is very unstable at this time going... Read More
Four blind men were asked to give a description of... Read More
We have two candidates for president that have really different... Read More
I continually hear from economists, talking heads, other market letter... Read More
If you have talked to a stock broker or financial... Read More
We are already in it, but you can't see it.... Read More
This is the continuing story of our two imaginary traders,... Read More
Exchange Traded Funds (ETFs) are a group of passive index... Read More
How do you make money without picking tops and bottoms?I... Read More
Its dinnertime and the phone rings. It's Joe Noname with... Read More
One of the most believed bits of conventional wisdom from... Read More
Cat or dog? Maybe Zebra. Shucks, I don't know, but... Read More
Everything you invest in has risk so you want to... Read More
Using Swing Trading Strategies and Technical Analysis when Trading Stocks... Read More
You probably know the story of Sherlock Holmes and the... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
What does it mean to short a stock?This means that... Read More
An insane person cannot evaluate an insane evaluation system.As you... Read More
∙ Make every investment in the stock market a long-term... Read More
Even if you don't own any of their stock or... Read More
Analyzing growth stocks is an important focus for any investor.... Read More
When an individual investor wants to roll up his sleeves... Read More
Stocks & Mutual Fund |