Despite the misleading hype you may find on the Internet, trading penny stocks online may be more risky than trading normal stocks. This is not a get-rich-quick scenario and if you treat it as such you could very well suffer the consequences.
Penny stocks are traded via something called an Over-the-Counter Bulletin Board — often simplified as the OTCBB — or perhaps via Pink Sheets. The low value of these stocks indicates either brand new corporations or corporatations which are in a struggle to survive. New companies sold on these boards haven’t yet proven themselves ready to be traded on the NYSE or NASDAQ. Older companies traded as penny stocks may have been penalized and removed from those major exchanges.
Most people become interested in buying penny stocks online because of the potentially high pay off that can come with these stocks. But these stocks also have a great down side. Because of the nature of penny stocks many people try to game or manipulate the system to their own advantage, but to the detriment of the other stock holders and sometimes the company of the stock they are gaming.
Before you get too excited about the idea of buying penny stocks, you need to understand what a penny stock is as well as the potential risk involved in trading this particular type of stock.
These tips should help you be aware of some of the risks and pitfalls involved in this market, and help you buy more successfully. Continue reading