A Penny for Your Stocks

According to Investopedia Inc. the penny stock market has seen phenomenal growth this past decade. From '94 to '03, the Over-the-Counter Bulletin Board trading volume increased an astounding 8900%, equaling a total of 63% of the NASDAQ and 78& of the NYSE share volumes. Many an investor has succumbed to their siren song.

It isn't hard to see why. Penny stocks are usually traded in lots of 1,000 and, as the name suggests, are bought (and sold) at incredibly low prices. There is no official price cut-off, and differences of opinion range from shares trading under $1.00 all the way up to $5.00. Others distinguish according to the market that they are traded on (the OTCBB, OTC or "Pink Sheets" for example). Yet others designate stocks as penny stocks based upon their market capitalization, or the value of each stock multiplied by the total number of outstanding shares. Regardless of the specifics, a general rule applies to all penny stocks ? they are a very high risk investment. Inversely, there's also the potential for staggering rewards.

But for every pot of gold at the end of the rainbow, there are thousands of cliffs and pitfalls along the way. The risks and dangers of penny stocks are many. In the stock exchange, there is a "best price" priority given to orders of a higher price than yours if you're buying or a lower price if you're selling. Combining this priority with what is very often low volume trading means there will be times when you find that your orders cannot be filled. In addition, there will be instances where you will have to settle for partial order fulfillment. And these are just dangers faced when your stock is performing well.

Penny stocks come from companies that are often less than credible, and unlike some of their more expensive cousins, can find themselves swayed by the power of rumors. Press releases, news stories, widespread whispers and even online forums and chat-rooms can be responsible for dramatically influencing their performance. This volatility creates two considerable challenges: 1) a high potential for schemes and scam artists; and 2) the inability to use traditional stock charting methods with any real effectiveness. It goes without saying that this isn't a market for the faint of heart.

Jennifer Gibbs is a successful freelance writer who lives in South Georgia with her husband and son. Be sure to check out her website for more great content, or to request a bid for your writing needs. http://www.JenniferGibbs.com

In The News:


pen paper and inkwell


cat break through


Choosing An Investment Stock Broker

If you want one.And I don't recommend any broker with... Read More

Discipline

One of the great "secrets" of successful people is discipline... Read More

Hot Stock Trader: How to Pick Momentum Stocks with Ease and Simplicity

Most stock traders know that momentum trading can be a... Read More

Complacency Indicator

If you haven't heard of the technical indicator with the... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Investing in the Stock Market

From the book 'The Stockopoly Plan' by the author Charles... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Buying Mutual Funds

It looks like the market is ready to start up... Read More

How To Buy And Hold

One of the most believed bits of conventional wisdom from... Read More

Wal-Mart: Discount Store, Discounted Stock?

As GuruFocus updates the stock buys and sells of gurus,... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

Discover the Retirement Breakthrough the Federal Government Created for You - The Roth IRA!

If you don't know what a Roth IRA is then... Read More

Where Is The Beef?

Where is the beef? Or maybe it should be where... Read More

Alfred E. Newman

What! Me worry?Many of you remember the cover of MAD... Read More

Stock Market Insanity

Let's first define insanity. It is doing the same thing... Read More

KISS Formula

There are formulas for just about everything, but it has... Read More

Economists #2

Economists know more about how the fragments of society work... Read More

Acapulco - The Stock Market Dives

There is a famous cliff on the ocean in Acapulco... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

Lifestyle Funds Provide Greater Security?

With the stock market stubbornly refusing to settle down and... Read More

Online Investing & Online Stock & Share Trading: Difficulty in Taking Stop Losses in the Market

This is an extract of an article which was first... Read More

Good News?

As the man said, "I've got some good news and... Read More

Rebalance And Diversify

The stock market has not been very kind to your... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Protect Your 401K

Checked your 401K lately? Going back to about a year... Read More

Trading vs Investing

I often hear from people, "I don't trade. I invest.... Read More

Buy Low - Sell High

Now where have I heard that before? I know. It... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

Dividend Paying Stocks

I would like to share with the reader an article... Read More

The Surgeon General

The Surgeon General of the United States says that smoking... Read More

Look Out The Window

Quick, look out the window. It's raining. No, the sun's... Read More

Market Psychology

Today we are inundated with tons of information about the... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor.... Read More