Penny Stocks are commonly traded Over-the-counter through Pink Sheets or OTC Bulletin Board. The companies associated with penny stocks don’t show up their legitimate history on the platforms on which they are manipulated. You will find that penny stocks are volatile in nature because they can be manipulated very easily.
US Market illustrates penny stocks as the ones traded outside national major stock exchanges. These are minor stocks coming under micro cap section. Penny stocks have low pricing and belong to very small level organizations. These companies might be new to the market with low capitalization value. It doesn’t always mean that these companies have low potential, but there are many chances for bankruptcy or fakeness in terms of company’s status. Market capitalization plays an essential role in determining the position of stocks of a company.
Penny stocks are also termed as nano stocks or small caps. These have a value lower than dollar 5 per stock (in US and Canada) and pound 1 per stock (in the United Kingdom). There are no strict regulations for penny shares. There are thousands of investors choosing penny stocks for making their investment in stock market with lower investment. Investors can get huge profits or losses depending on the company you choose for investment. If you are not making choice for the right company, you might end up in losing a lot of money. Hence, the volatility of penny stocks should be considered in mind before making the final decision to invest in them.
SEC also warns penny stock investments as the high risk category ventures and you should be very careful while making decision for trade with OTC stocks. There are some people who really earn from these stocks for the reason of being careful in trading and investing in genuine companies having initial stages of business. Understanding of penny stocks can help you to gain better ROI through your investments.