The field of buying penny stocks is both ripe and all potential hazards. On most sites on the Internet you will find people either trying to sell you something by hyping and exaggerating what they can buy penny stocks or delivers cold, clinical sites that offer good information, but can be like reading a book of science. With this article I hope to give you an unbiased introduction to buying penny stocks.
A penny stock, according to the SEC (Securities and Exchange Commission), is simply a very speculative stock value low. When a stock is speculative, the real value of the action is not known and its value is often dictated by the hype and new rather than actual data drive. A stock of low value can mean different things to many people.
Many people in the industry to use three primary variables to define a penny stock (also called a classic stock or stock microcap). The first is its market capitalization, the stock is technically a microcap stock with a market capitalization of less than 250 million dollars while the nano-cap stocks are less than $ 50 million. Some people use nano-cap and microcap interchangeable with penny stock. But others believe that a true penny stock is a microcap stock, which also sells less than $ 5 per share. In addition, some industry insiders believe that the definition of penny stocks are securities listed on the OTCBB or Pink Sheets.
Before you jump rope in the hype and excitement of superficial personalities in the online shopping world stocks Penny, you must understand that there are many dangers associated with buying penny stocks. As I mentioned earlier, many of these stocks listed on the OTCBB or Pink Sheets. This quote services do not require the same minimum standards and levels of public information that the major exchanges (AMEX, NYSE and NASDAQ). For example, the markets for OTC Pink (Pink Sheets) makes the listing brokers do not even need to file with the SEC.
In addition, the penny stocks are shares of companies often unknown to history very soon. This makes them more difficult to assess or predict. It also makes them more susceptible to fraud and less brokers who prey on naive ethics, promoting actions in "boiler rooms" where they apply high pressure sales and discourage independent research. You should never feel obligated to buy penny stocks or act on impulse, always do your due diligence.
A terribly common phenomenon and fraud these days is the pump and dump. This is a small group of investors Hypes a public stock (even invent data for the Hype Machine) and push more people to buy penny stocks quickly and soon. The hype and buy quickly artificially inflated the value of the action, when this small group of investors dumps stocks before they can return to its natural value.
So now you know what a penny stock is accurate and where they are traded. You must also have a good idea about their risk and some of the fundamental problems specific to buy penny stocks.
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