The Small-Cap Investor: Secrets To Winning Big With Small-Cap Stocks What is a Penny Stock?

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What is a Penny Stock?

A penny is a stock that usually trades for less than one dollar. This means they usually trade for pennies. There are micro-cap stocks, which traders sometimes call these types of stocks, but they trade a bit higher, usually no more than $5. And day traders and investors sometimes also call them nano and small caps.

When investing in penny stocks, there are no minimum standards they must meet for their listings, as they are made on the OTCBB (OTC Bulletin Board) and Pink Sheets. In the end, it really doesn’t matter because what makes these types of penny stocks tick is the price, not where they trade.

These types of stocks come from small-cap companies. It simply means the total value of that company’s shares.

The appeal of these stocks is that you can start trading them with little capital. Unfortunately, there is far less information about them for you to do in-depth research. Unlike larger companies whose shares trade higher, you won’t be able to access reports filed with the SEC on penny stocks.

While you may not have the luxury of getting this information in advance, these promotions are still a good way to get in on the ground floor of an up-and-coming company that has a high probability of future success. You will need to do some research on these companies, but it can pay off handsomely if you do.

Once you find a stock that you think has the potential for good returns, you can do your research and try to find out if the company has made its financial information publicly available. Don’t take anyone’s word that it’s worth investing your hard-earned money. Trading these stocks on a “hot tip” is just gambling.

Some red flags to look for in these types of stocks are if the auditors have not filed an audited financial statement for the company, or if the auditor states that the company may not have enough capital to continue operating.

The cost of your initial investment when trading these stocks can be very low, which makes it very, very attractive. But you have to remember that these stocks are very risky because it is very difficult to see the history of the company and therefore you can sometimes trade blindly hoping that things will go your way.

One way to de-risk yourself a bit is to sign up for a penny stock newsletter that has a good track record. Once upon a time the Microcap Millionaires newsletter. They are so confident in their research and picks that they give traders and investors who are interested in their services three free stock picks with no obligation.

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