Where To Buy Penny Stocks - The Question on Everyone's Mind?
Do you know where to buy penny stocks? Well, for the most part, knowing where to buy
penny stocks means knowing what penny stock brokers are available to you. All you do is choose one, then deposit your money into your account to
start it up--you only need a few hundred bucks for this--and then, begin your trading. It's best to choose an online-accessible discount broker
for this kind of trading, incidentally.
Penny stocks are largely traded via pink sheets. These are put together by the National Quotation Bureau and feature the bid and ask prices of
over-the-counter (OTC) stocks; this includes the market makers who trade those stocks. Unlike companies traded on a major stock exchange,
companies that are quoted on the pink sheets don't have to meet minimum requirements or do SEC filing. "Pink sheets" is additionally a reference
to OTC trading. The pink sheets take their name from the fact that they used to be printed on pink paper. If a company trades on the pink sheets,
its stock symbol will end with ".PK".
The phrases "penny stocks" and "micro cap stocks" get used interchangeably. Technically speaking, micro cap stocks receive their classification
due to their marketcapitalizations; and, on the other hand, penny stocks are classified by their price. Stocks with market capitalizations from
$50 million to $300 million are micro caps. Nano -caps, incidentally, are those with market caps of less than $50 million. According to the
Securities & Exchange Commission (SEC), a penny stock is one which trades for less than $5 per share. But, in reality, definitions vary among
traders; some say that the cut-off point is $3, while others say that the only penny stocks are those that trade for less than $1 per share. Most
traders also consider that any stock which is trading on the pink sheets or the over-the-counter bulletin board (OTCBB) is a penny stock.
Understanding Beyond Where to Buy Penny Stocks
In learning where to buy penny stocks, it is also important to learn about the risks involved in trading these stocks. Penny stocks
are high risk purchases, but savvy investors also know that this is why they are attractive. (In addition to their low share price.) Here's why
they are risky:
* Micro cap stocks don't offer the transparency that those stocks traded on the major exchanges do. They are not regulated in their filings
nearly as much by the SEC as, say, Fortune 500 blue chips are. So, you have far greater chance of not really knowing what you are getting when
you buy penny stocks.
* Stocks on the pink sheets and the OTCBB don't need to fulfill minimum standard requirements to stay on one of these exchanges. As a matter of
fact, this is often why the stock is on one of those exchanges to start with.
* Low liquidity levels. This means for you that you might not be able to sell stock even when you put in that order. Also, it becomes easy for
some traders to manipulate their prices through rumors or hype.
* Penny stock companies are typically start-ups without any established reputation, or those who are in very serious financial jeopardy.
So, knowing where to buy penny stocks also should go hand in hand with knowing what you are getting into with them.
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