Inexpensive penny stocks can be an attractive form of investing for the newbie trader. Low prices make it possible to trade many shares and this can make one big money in a short amount of time. That seems like a great way to make a living but it is not without pitfalls, and it is best to know a few things before you start.
The first step in learning how to trade penny stocks is understanding the risks. Compared to shares from large corporations, it is not difficult to manipulate the price of a cheap stock. Traders buy and sell based on good or bad news about a particular stock and almost anyone can cause a stir with a small investment.
The money you spend on cheap securities will not have much protection. Major corporations issue stock that is regulated by a number of rules and regulations. Your penny stock picks may have almost no regulation. Pink Sheets or the OTCBB (Over-the-Counter Bulletin Board) can be used for most picks.
Pink Sheets is the name of the publication from the National Quotation Bureau and it lists a large variety of over-the-counter (OTC) securities. Over-the-counter simply means that a stock is not listed with a major exchange. The name "Pink Sheet" comes from the color of paper that the publication was originally printed on. Also, not all OTC securities are Pink Sheets. This kind of stock has very little regulation and companies are not required by law to file reports with the Securities Exchange Commission or SEC.
The OTCBB or Over-the-Counter Bulletin Board and Pink Sheets are separate entities. They are both quotation services yet the OTCBB is more stringent on its requirements and its companies provide regular reports to the SEC. Also, the OTCBB is run by NASDAQ. You can find a lot of helpful info at their website but only qualified brokers may buy and sell.
It is always best to research any penny stock investing opportunity completely before you buy. You can go to the SEC website to check out a company. You also may check out a company's ratings with the OTC Markets website. This service rates companies according to how much information they provide investors.
If you cannot find information on the financial health of a company it should be a red flag. You should not consider investing unless you can find financial statements released by the company, and then you should study them thoroughly. You will find good info at stock resource sites. Some are free while others charge a minimal fee.
When you buy or sell an OTC stock it must be done through a brokerage that deals in them. You can use a full service or discount broker. To get the most from your investment dollars and to minimize risks, check out each company as much as possible beforehand. Penny stocks can bring great rewards, but you take your chances.
The first step in learning how to trade penny stocks is understanding the risks. Compared to shares from large corporations, it is not difficult to manipulate the price of a cheap stock. Traders buy and sell based on good or bad news about a particular stock and almost anyone can cause a stir with a small investment.
The money you spend on cheap securities will not have much protection. Major corporations issue stock that is regulated by a number of rules and regulations. Your penny stock picks may have almost no regulation. Pink Sheets or the OTCBB (Over-the-Counter Bulletin Board) can be used for most picks.
Pink Sheets is the name of the publication from the National Quotation Bureau and it lists a large variety of over-the-counter (OTC) securities. Over-the-counter simply means that a stock is not listed with a major exchange. The name "Pink Sheet" comes from the color of paper that the publication was originally printed on. Also, not all OTC securities are Pink Sheets. This kind of stock has very little regulation and companies are not required by law to file reports with the Securities Exchange Commission or SEC.
The OTCBB or Over-the-Counter Bulletin Board and Pink Sheets are separate entities. They are both quotation services yet the OTCBB is more stringent on its requirements and its companies provide regular reports to the SEC. Also, the OTCBB is run by NASDAQ. You can find a lot of helpful info at their website but only qualified brokers may buy and sell.
It is always best to research any penny stock investing opportunity completely before you buy. You can go to the SEC website to check out a company. You also may check out a company's ratings with the OTC Markets website. This service rates companies according to how much information they provide investors.
If you cannot find information on the financial health of a company it should be a red flag. You should not consider investing unless you can find financial statements released by the company, and then you should study them thoroughly. You will find good info at stock resource sites. Some are free while others charge a minimal fee.
When you buy or sell an OTC stock it must be done through a brokerage that deals in them. You can use a full service or discount broker. To get the most from your investment dollars and to minimize risks, check out each company as much as possible beforehand. Penny stocks can bring great rewards, but you take your chances.
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