Penny Stocks Can Be Exceedingly Lucrative However Just as Dangerous! Investing in Penny Stocks may turn into a savage journey. It can be vastly gratifying nevertheless it is also exceptionally hazardous. What’s more continual vigilance is imperative to keep away from falling prey to fraud. Trading Penny Stocks just isn’t for the weak hearted.
Penny stocks are common stocks that trade for a smaller amount than five dollars. In fact, loads of of them are traded for measly pennies as well as less for every share.
Various organizations forbid transacting in stocks that are lower than five dollars in value. In consequence, this adds to a lack of liquidity which adds to the volatility of those Shares.
Customarily, Penny Stocks usually are not traded on the conventional exchanges – NYSE, NASDAQ, or AMEX – and are not binded to the same governing or reporting stipulations as stocks traded on those exchanges.
Yet, it is important to note a specific distinction to the statement above. Countless sub $5 dollar shares do trade on the regular exchanges and are binded to the austere regulatory and reporting stipulations of those exchanges as are all stocks traded on those exchanges.
In addition if a stock trades below $1 on the regular exchanges for very long, they run the risk of been de-listed from those exchanges and would have to re-list on the Over The Counter (OTC) Bulletin Board or the Pink Sheets.
Genuine Penny Stocks are traded through quotation services such as the Bulletin Board or the Pink Sheets (recognizable with a .PK suffix) .
The Allure Of Penny Stocks To Numerous Traders
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A small sum of money can command a large amount of stocks
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The low price as well as possibility for speedy advance
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Because of the low stock prices, even tiny moves can turn into huge percentage profits
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Despite the fact that a number of Penny Stocks are lightly traded, others volume can get to many hundreds of millions of shares traded each day because of their cheap price.
Regardless of the fact that there is an clear appeal for the promise of fast and astronomical gains from investing in penny stocks, there is a not so pretty aspect to take into account.
A large percentage of stocks listed on the Pink Sheets or the OTCBB are manipulated and traded fraudulently, so Buyers Beware.
Disadvantages Of Penny Stocks
Listed below are some of the hazards involved including causes of manipulation.
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Lack of liquidity can cause huge volatility and also at times make it tricky to go into or exit a position.
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Lack of regulatory requirements and no minimum accounting standards make penny stocks much more vulnerable to manipulation and fraud.
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Pump and Dump schemes in thinly traded companies: Dishonest traders buy the stocks cheap after that tout the stock on bulletin boards, chat rooms, or additional means as the most recent "hot" stock.
As a result, they get other buyers to run up the stock price – then they dump their personal shares at massive gains.
To conclude, trading in penny stocks is not for everybody. It can be massively gratifying but it is also immensely risky.
Before plunging in, examine your tolerance for risk scrupulously.
If you come to a decision that you have the courage to engage in it, apply merely a small sum of your available investment resources to it, at the very least until you know what you are doing.