Posted on 21 August 2012.
The newest companies on the scene work their way up from the bottom, just like every other hardworking individual and company in the global economy and companies use trading penny stocks to gain traction. Many investors, seasoned or new, find trading penny stocks an interesting and potentially lucrative option, although many are not aware of the risks involved. Understanding the origin of penny stocks and learning the best trading strategies can reduce your risks or at least provide the knowledge required to move forward with confidence.
A universal definition of the penny stock is illusive. Despite this, most penny stock companies are very small and publicly held. In the United States, these companies may have stock traded for less than one dollar. In other situations, the stock may cost fewer than five dollars. At any rate, the companies are usually very small and trading penny stock becomes attractive to many investors hoping to pay very little and receive a large return.
Trading penny stocks is not for the faint of heart. It takes a person with a high tolerance for risk to become involved in this potentially profitable art. Following are a few reasons why trading penny stock is a volatile choice:
* Penny stocks do not undergo the amount of regulation other stocks are subject to
* Penny stocks have a very limited following and disclosure requirement
* Penny stocks can become susceptible to market manipulation.
As a result, penny stocks offer a far higher risk than that of other stocks on the market. The new or seasoned investor interested in the stocks should have a very high-risk tolerance. If you can tolerate high risk investing, trading penny stocks may work well for your tastes. Learning how to pick, reject and trade penny stocks will certainly place you in a unique position to earn a possible return.
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