Technically, pennystocks are any stocks that trade for less than $5 per share, however those of us who trade penny stocks consider stocks $5 or less that trade on AMEX, NASDAQ & NYSE to be Small caps or micro caps. We reserve the term penny stocks for those stocks that trade on the OTC (Over The Counter).
"So what's the difference?", you may ask. Well, penny stocks for a start are not held to the same reporting standards as big board stocks. Pennystocks are typically less liquid than big board stocks and penny stocks are a whole lot more volatile than their big board brothers & sisters. The volatility in penny stocks is part of what makes them risky, but it also gives pennystocks the potential for high rewards, which is why so many home traders are drawn to the OTC market.
Many of the companies that trade on the OTC are at worst; complete fakes, not much more than an idea in someone's head, projects being run from someone's garage, legitimate companies that are suffering from financial hemophilia, or at best; companies that have real marketable products or services, but just don't have the financial backing to make their company a success.
"If I can make 100's of percentage gains on my money in a very short time span who cares?", you may ask. Well, if you read and allow what we say in our disclaimers to sink in and you take the time and effort to learn how to trade penny stocks, then the answer should be; "Not me!"
Never invest more than you can afford to lose, it's not a cliché, it's a Rule! Live by it. Don't see your trade as an investment, see it as a trade. The goal is to get in and out with a profit, not make an investment that you deem to be part or all of your retirement fund. Do your dreaming in bed, don't expect your penny stock trade to become a means for you to trade in your Pinto for a Porsche.
"Okay, I get it, so how do I find a hot pennystock to trade?" you ask. Well, many people run Google searches, using phrases like; Hot Penny Stock, List Of Penny Stocks & Top Penny Stocks, to find their picks. Others sign up for penny stock newsletters aka penny stock alerts, email lists. Another way is to troll the stock related message boards, penny stock chat rooms and social media like; twitter, facebook & LinkedIn to find their picks. Here at StockGoodies® we say, whatever method you use to find your penny stock to trade, make sure you have already practiced trading on paper or by using a virtual trading account (see our disclaimer for links to virtual trading platforms). Even when you are at the point where you are comfortable trading pennystocks with real money, we still advise that you practice on paper or virtually. As the old joke goes: "What's the best way to get to Carnegie Hall?" ..... "PRACTICE!"
Written by Nilbud, all rights reserved. ©2013