The stocks you really have been reading about here are ones which are expensive to invest in. You don’t have to stay with those expensive stocks. You have the option to choose penny stocks. Penny stocks are stocks from companies that trade at very low values. The SEC states that a penny stock has a value of less than $5 a share and wouldn’t be recorded on one of the key exchanges. On the surface, penny stocks seem interesting because of how cheap they are. At exactly the exact same time, these stocks are risky and tough to work with because it’s impossible to figure out where they might go when you trade them. You can trade these affordable stocks successfully with our best penny stocks to buy now.
What’s a Penny Stock?
A penny stock is a stock which has a very small market cap. In addition to having shares less than $5 per cent, the market cap of the company is around $50 million to $300 million in value and isn’t necessarily a worldwide recognized group. The stock is also trading in some smaller markets. In the United States, penny stocks are traded over the counter. That is, the transactions are managed between parties with no exchange. The OTC Bulletin Board and Pink Sheets both record information on how these penny stocks are coordinated. The most noteworthy feature of penny stocks is that they have very small values. Some of these stocks might not even be worth a penny per stock.
The general thing about penny stocks is they’re extremely cheap. However, as you will read next, these stocks are extremely risky.
Serious Hazards To Trading Penny Stocks
Hard to Prepare Trades
Many investment brokers won’t work with penny stocks with the belief that they are overly risky and hard to recognize. They might also struggle with planning orders as a result of markets involved being slower than the significant ones. There’s also the worry about what happens when one trade shifts the value of this inventory.
No Real Standards
Although a lot of stocks have strong standards for how they should be traded, you are not likely to get these in penny stocks. A stock like this doesn’t have to meet any significant criteria to get onto an exchange. An OTC penny stock doesn’t need to file information with the SEC. The OTCBB does request that the stocks that it lists do file documents with the SEC, but this isn’t necessarily a requirement. You can still check the SEC to see if a stock you want to invest in has appropriate filings, but that may be hard to find.
Hard to Find Information
The next issue surrounding OTC penny stocks is that you might not get enough details on what’s available. You’re not likely to find much information on penny stocks because news agencies are not going to report on them. These organizations are too small for some of these news agencies to really take seriously.
You might read information about penny stock tips to check out for example stocks which may be intriguing for people to invest in. These reports are often made with heavily biased information by people who have positions in those stocks. They might also provide you with names and symbols but not enough information about what you can expect to realize from those stocks. This makes it harder for you to actually get the details that you need. What’s even worse is that these stocks aren’t easy to get access to through a site. If you tried to type in”OTC stock quotes” on a search box, then you might just come across a bunch of blogs that record details on such quotes. This just makes penny stocks more unreliable due to the lack of available data in the process.
Easy to Inflate or Fix
Have you ever noticed cases where the value of a penny stock has undergone a dramatic shift in a very brief time? For instance, in February 2018, Reach Messaging Holdings, an OTC stock below the RCMH ticker, experienced a significant bump in its value that was really short-lived. The stock had a value of $0.0003, but it soon moved up to $0.0008. It then went back down to $0.0003 in just a day and eventually to $0.0002.
What if you had a million shares in RCMH at this time? You may have bought them when the stock was 0.0008 with the belief that the stock would continue rising. You would have spent $800 on the inventory. As that stock drops back to $0.0003, you would have lost $500 on your investment. Simply put, you went with the belief that the inventory would continue rising in value, but that stock really bottomed out.
That RCMH stock may have increased in value because one person made a massive trade in that stock. That person might have bought 10 million or more stocks in RCMH and then sold them off in a few hours or days after the stock saw a sizable increase. Even worse, that person may be someone from within the business. This is a valid problem for penny stocks that many folks fail to think about. It only takes one person to inflate or deflate the value of a stock. In actuality, this often happens with stocks that are not very liquid. A stock that has no liquidity is not likely to change much in value unless one person managed to put in a huge order and get a sizable number of shares sold or bought all at once.
Pumping and Dumping
The pump and dump strategy is a related issue that some penny stock services often struggle with if the volume is extremely low. Financial advisors like ziptrader and investopedia do not use this technique. They are some of the top & best penny stocks to follow in getting good results in your gains. Although it is not illegal, it certainly feels like it ought to be because it directly manipulates the value of a penny stock and is often done by someone from within the business, such as:
1. A person buys a large number of shares in a stock. This is usually for penny stocks, although it could theoretically happen with any stock. The absence of volume of several penny stocks makes them more likely to be targeted by pump and dump schemes. They are much easier to manipulate.
2. That individual then tries to promote a stock by offering false or possibly misleading statements regarding the stock’s ability to grow. In years past this was done through cold calling methods by phone. Today, individuals can go to social media or set up their own blogs to promote these stocks.
3. Individuals then fall for these statements and purchase the stock. The people who choose to purchase these stocks are usually willing to invest in them without thinking twice. They may be emotionally driven into investing in these stocks and not investigating the company thoroughly.
4. After enough people buy the stocks in question, the man who started the scheme will sell off his shares as that person will have made enough money from the people purchasing the stock.
5. The people who fell for the pump and dump scheme could lose hundreds or even thousands of dollars from this trick. The problems with the pump and dump scheme are very significant.