Investing in Penny Stocks can be a difficult road. It can be very useful but also extremely risky. Moreover, the continued awareness is needed to keep away from succumbing to fraud. Trading Stocks Penny is not for the faint of heart.
Penny stock. are shares that are trading for less than five dollars. The truth is that many of them are sold for pennies per share and less miserable.
Many companies prohibit transactions in stock. with less than five dollars on the price. Consequently, this adds to the lack of liquidity adds to the instability of the stock.
As a general rule, Penny Stocks aren 't listed on the conventional - NYSE, NASDAQ, AMEX or - are not otherwise subject to the same regulatory obligations or reports as the shares traded on the exchanges.
However, it is important to mention a specific difference of the above statement. Actions under a dollar a number of five U.S. dollars traded on regular exchanges and are subject to the provisions austere regulatory and exchange information like all stocks traded on the exchanges.
Also, if a stock trading below $ 1 in exchange for long regular runs the risk of off the list of exchanges and would have to return to the list on the bulletin board Over The Counter ( OTC) or Pink Sheets.
Penny stocks are traded genuine through dating services such as bulletin board or the Pink Sheets (recognizable with a PK suffix.).
The attraction of penny stock investors countless
A small amount of cash can result in a significant amount of reserves
The low price and the promise of rapid growth
Because of the cheap stock prices, even small movements can lead to huge percentage gains
Despite a series of penny stocks is lightly traded, the volume of others may reach several hundreds of millions of shares traded each day because of its low price.
Despite the fact that there is a clear appeal to the potential for quick profit and invest stellar money in stocks, there are not that attractive aspect to take into account.
A large part of the actions listed in the Pink Sheets or OTCBB are manipulated and fraudulently marketed, so buyers beware.
Disadvantages of Penny Stocks
Here are some of the challenges of counting the causes of manipulation.
The lack of liquidity can lead to extreme volatility, and also sometimes make it difficult to enter or exit a position.
The lack of regulatory obligations and no minimum accounting standards that penny stocks much more vulnerable to manipulation and fraud.
Pump systems and dump thinly traded companies: Crooked traders buy stocks cheap after promoting actions in the message boards, chats, or other additives, such as the latest penny stock hot or the best penny stocks.
Consequently, to get others to run the stock price - then dump their personal actions huge profits.
To conclude, investing in penny stocks is not for everyone and everyone. It can be immensely rewarding, but also extremely dangerous.
Before diving in, consider your risk tolerance observed. Due deligence exercise their penny stock picks.
In the event that the conclusion that you have the guts to participate in it, making only a small amount of its investment funds available, at least until you know what you are doing.
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