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 Bottom?

Every day I hear someone on CNBC proclaim that "this... Read More

How To Buy And Hold

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

Trading Systems

To become a successful trader you must have some kind... Read More

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

'Sector funds are too risky.' 'I doubled my money with... Read More

The Three Little Pigs Went to the Stock Market

Three little pigs went to the market to stock up... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

Evaluation I

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

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

No Load Mutual Funds: Boost Your Portfolios Returns

Investors who exclusively use broadly diversified, no load mutual funds... Read More

A Funny Thing Happened on the Way to the Stock Market

On the 40 year journey through the turmoil of a... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

How Eating Bitumen Made Me a Better Trader

Trading is a fascinating activity.There are so many layers to... Read More

I Love To Lose Money

Well, not really. What I mean is I don't mind... Read More

Why Stock Is More Risky Than Options!

You probably have been told that options are risky. Even... Read More

Stock Market Investing Odds

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

Duct Tape

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

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

Dont Buy Worldcom! A Guide to Wise Bottom Fishing

Over the past few months, several investment professionals have brought... Read More

Do You Know What is the Single MOST Critical Mistake in Trading the Stock Market??

Well maybe that's overstating it a little, but it's certainly... Read More

The Club

Yesterday I received my monthly issue of MONEY magazine. This... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the... Read More

This Market Is Different

All of the talking heads have been telling us that... Read More

Big Buildings Can Mean Big Economic Disaster

AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

E-mini Day Trading - Day Trading for Beginners - Stock Market Timing Software

I mean it when I say that. While plastic silverware... Read More

Why the Majority Fail at Stock Investing

The gleam and bright lights of Wall Street lure in... Read More

Direction

It is difficult to make money in a bull market,... Read More

Your Trading Objective: Why is that so Important?

You've decided to try your luck at trading stocks or... Read More

Mutual Funds are Dead

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

Laws and Efficiencies and Theories of Diminishing Returns

The basis of diminishing return discussions surround such simple notions;... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Mutual Fund Expense Lies

When purchasing mutual funds we are cautioned to read the... Read More

Structured Settlement; Lawyers in NY and Mutual Funds

Minority Report the movie may not be far off if... Read More