What is penny stock ?
Penny stocks, also known as cent stocks in some countries, are common shares of small public companies that trade at low prices per share. These securities are popular because it requires small capital amount to make an investment and as in all, investors can make a big profits.
Then the desire of small investors with small capital are seeking to make high profits, The volume of penny stocks is a very important factor when analyzing the penny stock.
The volume of penny stocks is very important when analyzing the penny stock. As with the larger companies, we can apply the fundamental analysis on these values in the same way, but we must take into account other additional factors . The technical analysis is not the most convenient as they often have large gaps or explosive movements and indicators often fail. We must be aware of rumors or news that can cause an unforeseen change in the business.
Really penny stock, in my opinion, should be taken as a possible investment in the event that they feel very safe and always considering adequate risk capital. Many websites recommend to those investors with small capital and do wish to invest through penny stocks , but the recommendation should be just the opposite. If you have small capital, that’s leverage. I know, the temptation to invest in stocks that trade at just a few cents is quite large, because when lower the retail price is the movement necessary to obtain benefits. A few cents rise in price could mean a substantial return. For example, if a stock is worth 0.10 and 0.30 within weeks. You’ve tripled your investment.
But besides the trading volume, the trader should consider another fundamental factor for analysis, the time factor (which by the way, no penny stocks available for binary options). The time horizon should be large enough to observe with the greatest possible tangibility.
Also, we should clarify that there are two types of penny stocks: the “bulletin board” and “pink sheets” . The first actions are also known as Over-the-Counter , and are companies that previously traded on the Nasdaq but when its low price to less than 1 dollar they removed from the market. These actions also are often called Nasdaq shares but erroneously, even though we could say they have a connotative meaning.
Pink sheets shares are traded on the National Quotation Bureau and are known as the pink sheet market. At present, the pink sheets have many foreign stocks like Nestle. this companies begin their work or those that failed after being suspended from the stock exchange are located New York or Nasdaq.