Penny Stocks – A Simple Definition for Beginners

Essentially, a penny stock is one that trades for pennies. It can be an extremely volatile market, as investors expect a large return for a small amount of input. These types of stocks lack liquidity, have limited following and disclosure, small capitalization and also have large bid-ask spreads. However if you do it right, you can reap the rewards and they tend to be traded over the counter, using pink sheets and OTCBB. Penny stocks are usually traded outside of the major market exchanges, due to the small amounts that they trade with and it takes a lot of research and education in the subject to really become knowledgeable about them.

In some countries, penny stocks are also known as cent stock. While there is really no definition of the penny stock that is accepted all over the world, the definition above is pretty standard. Many people put money into penny stocks, as well as other opportunities such as Bullion Vault. With any investment opportunity, it is important to make sure that you have as many facts as possible before making a decision. If you get it right, there can be good rewards, however it is definitely worth making sure that the opposite does not happen.

The OTCBB, or the OTC Bulletin Board provides over-the-counter equity securities and services to their members. To become a member, you must subscribe and then you can enjoy all the benefits that will be available to you. The equity securities that the OTCBB provides, are not available on the NASDAQ or national stock exchange, so are therefore unique to subscribing customers. Penny stocks tend to have limited listing requirements and not very many regulatory and fulling standards. They usually belong to small companies with speculative shares that are not liquid.