A penny stock is a stock which has a very small market cap. In addition to having shares less than $5 per cent, the market cap of the company is around $50 million to $300 million in value and isn’t necessarily a worldwide recognized group. The stock is also trading in some smaller markets. In the United States, penny stocks are traded over the counter. That is, the transactions are managed between parties with no exchange. The OTC Bulletin Board and Pink Sheets both record information on how these penny stocks are coordinated. The most noteworthy feature of penny stocks is that they have very small values. Some of these stocks might not even be worth a penny per stock.
The general thing about penny stocks is they’re extremely cheap. However, as you will read next, these stocks are extremely risky.
Serious Hazards To Trading Penny Stocks
Hard to Prepare Trades
Many investment brokers won’t work with penny stocks with the belief that they are overly risky and hard to recognize. They might also struggle with planning orders as a result of markets involved being slower than the significant ones. There’s also the worry about what happens when one trade shifts the value of this inventory.
No Real Standards
Although a lot of stocks have strong standards for how they should be traded, you are not likely to get these in penny stocks. A stock like this doesn’t have to meet any significant criteria to get onto an exchange. An OTC penny stock doesn’t need to file information with the SEC. The OTCBB does request that the stocks that it lists do file documents with the SEC, but this isn’t necessarily a requirement. You can still check the SEC to see if a stock you want to invest in has appropriate filings, but that may be hard to find.
Hard to Find Information
The next issue surrounding OTC penny stocks is that you might not get enough details on what’s available. You’re not likely to find much information on penny stocks because news agencies are not going to report on them. These organizations are too small for some of these news agencies to really take seriously.
You might read information about penny stock tips to check out for example stocks which may be intriguing for people to invest in. These reports are often made with heavily biased information by people who have positions in those stocks. They might also provide you with names and symbols but not enough information about what you can expect to realize from those stocks. This makes it harder for you to actually get the details that you need. What’s even worse is that these stocks aren’t easy to get access to through a site. If you tried to type in”OTC stock quotes” on a search box, then you might just come across a bunch of blogs that record details on such quotes. This just makes penny stocks more unreliable due to the lack of available data in the process.