Buying Penny Stocks

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

OTCBB is an acronym that stands for Over the Counter Bulletin Board. Stocks that are not accepted for trade on the big exchanges can be traded here. If a stock is described as OTC, 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 requirements imposed by the Securities and Exchange Commission. The reason for the name Pink Sheets is that the publication was once printed on pink paper. .PK is the designation ending for a stock symbol listed on the Pink Sheets.

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

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





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