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

---

The Elephant

Four blind men were asked to give a description of... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

The Stock Market Investor?s Worst Enemy

Every stock market investor faces one primal enemy. An enemy... Read More

Performance Funds

Mutual funds are doing more and more to discourage investors... Read More

The Big Bad Bear

The big bad bear is stirring again. So far he... Read More

Never Lose Money

Never lose money in the stock market again. Yeah, I... Read More

What Are You Waiting For?

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

Online Broker Trade History Not Doing the Job

Let me start by saying that...Most online brokers do not... Read More

Choosing a Stock Broker

If you were to find that you had some severe... Read More

The Secret Art of Backtesting

If you have not back tested your trading system, you... Read More

401K-itis

Are you one of those many people who dread reading... Read More

Stock Loans

Hedge current portfolio positions and gain access to capital resources... Read More

Evaluation I

An insane person cannot evaluate an insane evaluation system.As you... Read More

Momentum

One of the basic laws of physics states that a... Read More

Which Way The Market

I am hearing predictions by brokers, financial planners, talk show... Read More

Duct Tape

Did you run out to buy that duct tape yet?... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Trading Baskets II: The Crapolio, A Roll of the Dice in the Stock Market

In a previously written article, we expanded the use of... Read More

Index Fund Trading Using Technical Analysis and Swing Trading Strategies

Index Fund Trading can be one of the most profitable...or... Read More

Different Types of Mutual Funds

This is a guide to the different types of mutual... Read More

Buying Stocks and the Importance of Correct Timing

An investor can find and research the best stock on... Read More

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Inverted Interest Rates

Inverted interest rates? What's that? Who cares? Even if you... Read More

Invest, Be Wrong, and Make Money in the Stock Market

I have been trading for several decades and was an... Read More

Stock Investment Advice

Stock investment advice is easy to find. Do you get... Read More

Stock Market Investing Odds

The greatest stock market myth is the idea that investing... Read More

Is the Stock Market for You?

Many people would like to diversify their portfolios to expand... Read More

Stock Market Course .... Day Trader Online Seminar ... Can You Generate Profits Trading from Home?

When it comes to stock market trading it PAYS to... Read More

Mutual Funds are Dead

You may have wondered why your mutual funds have been... Read More

Trading Stocks ?Never Forget About A Past Trade

We all know that emotions control every decision that an... Read More

Enron Cure

Let's hope you did not have any of the Enron... Read More

Value Investing: Selecting From The Bargain Bin

Picking a beaten-down stock requires a different kind of selection... Read More