Trading Penny Stocks – What Are Penny Stocks?
What Are Penny Stocks?
Penny Stocks are stock shares of public companies which trade below $1.00 USD per share. In the United States and parts of the United Kingdom, they are called “penny stocks.” Elsewhere in the English speaking world they are known as “cent stocks.”
People avoid trading or investing in penny stocks because of their reputation for fraud and weakness. And, yes there is fraud in the penny stock arena. But, there is also fraud in their larger big brothers on the major exchanges. There are almost always crooks in any industry. Do you remember Adelphia, Enron or Arthur Anderson? You protect yourself against fraud with good research.
Normally, penny stock companies are smaller companies that are typically undercapitalized, have weak sales, weak balance sheets and poor P&Ls and frequently have subpar management and sales teams.
And, believe it or not, these are the precisely the reason that they are so attractive to speculators. When stocks have those characteristics, they are candidates for changes. And, those changes can create conditions that speculators absolutely love!
Why Many Speculators Love Trading Penny Stocks
Many stock speculators love to trade penny stocks. In fact, they specialize in them. Penny Stock Trading has both the speed and profit potential of highly-leveraged instruments like stock or commodity options.
But, they avoid the major drawbacks of those two venues.
They don’t expire like options and they don’t get delivered and dumped in your driveway like commodities.
Look for my next article entitled “Three Reasons To Trade Penny Stocks” to discover why you may actually want to start trading penny stocks.
Incoming search terms:
- united kingdom pennystocks
