What are Penny Stocks

Many active and potential investors have probably heard of penny stocks. But many people are still unsure so we’d like to help clarify what are penny stocks?

In general penny stocks are defined as shares of a company which trades for less than $5 each. Yes there are indeed some shares of companies which can trade for pennies or even fractions of a penny. However the SEC and major brokerage houses typically set a $5 or less per share threshold to be considered a penny stock.

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On the other hand, these kind of shares run the risk of price manipulation. For example since many of these shares are thinly traded and cost less than $1.00 each, individuals and buying organizations have bought up hundreds of thousands or even millions of shares. They then used web site promotions, misleading press releases and email blasts to drive up interest in the particular company.

This often misleading and inaccurate information helped drive up the price of the stock while the original investors which were responsible dumped their shares to unknowing investors and made significant profits.

The actual value of the shares was much less so these new investors ended up losing money at the expense of the people pumping up the value of the shares. The expanded use of the Internet has made it much easier to perpetuate these kinds of scams.

At the same time there are indeed legitimate situations where a company has limited capital and can greatly benefit from the money generated through the sale of their penny stocks. It is certainly very important to learn as much as possible about the company involved in order to make good decisions.

What is the easiest way to trade penny stocks:

You can join penny stock newsletter. They will tell you when to enter and exit the market. One that I recommend is Microcapmillionaires. For a start they are Offering Non-Paid Subscribers 2 Free Stock Picks For a Limited Time. This Offer Will End Once a Reasonable Amount of Paid Subscribers Have Been Reached. So go HURRY try them for free.

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