What are penny stocks?
Aside from companies with tiny to small market caps with tremendous upside potential, penny stocks are among the riskiest investments out there. While the definition of a penny stock varies from a common stock that trades for less than five dollars a share to a micro cap equity trading for less than a dollar, we can all agree that penny stocks are low-priced, highly volatile and, typically, speculative in nature.
Penny stocks run the gamut from sub penny stocks as low as fractions of one cent (e.g. $0.0008) to shares in companies with market caps of less than $50 million. These descriptions and characteristics are all well and good but, for our purposes here, Mr. Solvent considers penny stocks as stocks that trade with a price per share of less than five dollars.
If you're even remotely familiar with the capital markets, you're fully aware that a stock could start the day as a higher priced stock, decrease in value throughout the day, and technically become a penny stock, even temporarily. Of course, if you're a penny stock trader, small cap investor, or otherwise reading this, chances are you're looking for that next big opportunity that could run up a few hundred percent in a day, or even a thousand times its initial purchase price in a few months to a year.
While opportunities for such massive intraday, or even monthly, gains are almost unheard of in most capital markets, traders and investors are much more likely to see these profitable situations in stocks traded over-the-counter (OTC) in the world of penny stocks.
Taking Mr. Solvent's definition of a penny stock (all stocks under five dollars per share) into consideration, penny stocks can be found on the Pink Sheet market but also on other exchanges such as the Nasdaq, OTC Bulletin Board, and American Stock Exchange, also known as the NYSE Amex.
Whatever the case, and the price of the stock may be, traders and investors must have resources to purchase and trade penny stocks. There are plenty of penny stock brokers that allow you to trade penny stocks on the internet but it's always good to look into each broker's commission rates, minimum funding amounts for new accounts, tools and features, and fees and restrictions that may be associated with buying and trading penny stocks.
These are some popular penny stock brokers you may have heard of: ThinkorSwim.com , Zecco.com , Etrade.com , ChoiceTrade.com , Schwab.com , SogoTrade.com and Scottrade . Some penny stock brokers have no minimums, while others require at least $500 or more. For example, if you want to look into a margin account, chances are you'll need an intitial investment of $2,000. Again, taking the time to chose the right, cost-effective penny stock broker to suit your needs will help you on your path to becoming increasing capable of meeting your financial obligations. Remember, being solvent involves a combination of planning, education, decision-making and self-discipline.
In addition to having a penny stock broker, Mr. Solvent finds it useful to utilize tools such as stock screeners. In particular, Mr. Solvent has found that EquityFeed has it all -- powerful and fast filters (price, volume, movement, highs, lows), easy-on-the-eyes charting, level II quotes, alerts, research and news, sector views and the list goes on. Check it out for yourself.
Mr. Solvent and SolventStocks.com are not a financial advisory service. We ask that our members read and fully understand our Disclaimer, and calculate risk based on their own due diligence and individual financial circumstances, after speaking with a licensed financial advisor.
Never invest in any stock mentioned on this website or in any email from Mr. Solvent and SolventStocks.com unless you can afford to lose your entire investment.