How To Trade Penny Stocks

Rules on Penny Stocks

The common understanding about penny stock in financial market of US is a kind of stock trading outside major stock exchanges. The major stock exchanges in US are NYSE and NASDAQ where the major stock trading takes place. For a beginner, the investment in penny stock may be a good option but at the same time he should understand all the related terms and the risk associated in stock trading.

SEC Definition on Penny Stocks: The Securities and Exchange Commission (SEC) has explained the term penny stock as a low-priced below $ 5.0 speculative securities of very small companies. As per SEC rules, the view with regard to trading is open for penny stocks and in addition to the over the counter trading of these stocks such as OTC Bulletin Board or Pink Sheets, these can also be traded on security exchanges including foreign exchanges.

US Securities and Exchange Commission: The mission and aim of the US Securities and Exchange Commission is to protect the investors from fraud, scam or other type of misappropriation. The commission is also ensure that the markets are efficient and fair. The commission also facilitates capital formation. The commission encourages more and more investors to get benefit from the share markets. It is one of the pillars for improving the economy of United States that will result more healthy opportunities for employment and better health and living standards for common people of United States.

Where to trade penny Stocks

The role of the commission is not limited to ensure proper protection of investors but it is also responsible for framing various rules and guidelines for smooth functioning of stock exchanges. It also lay guidelines for companies desirous to collect money from the market and strictly monitor the financial and other activities of such companies. It also ensures that the companies are taking care of their investors according to the rules and guidelines.

SEC Rules on Penny Stocks:  As per the rules laid down by SEC, a broker or dealer is required to approve the customer desirous to sell the penny stock before the transaction. The broker should also get a written request from such customer.

SEC rules that a customer desirous to purchase a penny stock should be provided a document mentioning the risk involved in the penny stock. The broker or dealer should also inform the customer the current market rate of the penny stock and the commission that will be charged by the broker.

SEC further rules that a monthly statement of the account showing the current market rates of each penny stock held by the customer in his or her account should be send to the customer.

Investment in penny stock is risky and investor should have gone through the risk associated for these stocks before initiating any transaction. These stocks are not quoted regularly and it is difficult to get quotes of some of the penny stocks. Investors should also get information about the current market rate and dealers commission before buying the stock.

How Do You Trade In Penny Stocks

How Do You Trade in Penny Stocks?

Many beginning investors hear that penny stocks are a good way to get started playing the stock market. But penny stocks are hard to find and trade infrequently. So, where can I find penny stocks when you’re interested in making an investment?

Penny stocks don’t trade on well-known stock exchanges such as NYSE, NASDAQ, and AMEX. Rather, penny stocks are traded “over-the-counter,” and infrequently so. Some investors shy away from trading in penny stocks because of this infrequent trading, which makes it hard to sell penny stocks. Some investors fear being unable to unload stock that’s losing money, compromising capital, and losing their entire investment. This can happen with stock that trades infrequently, and this can happen with penny stocks. Penny stocks are considered a high-risk investment for just this reason.

But if you can’t find them on the open market, then how do you trade in penny stocks? It’s true that penny stocks sell for low prices, allowing investors to buy shares at minimum prices. When all goes well, the stocks make good profit for a small initial investment. This is the promise of penny stocks, and why some investors find them very compelling. Those who want to trade in penny stocks may have to look a little harder to find the stocks they want to invest in, but for many this is worth it. Finding information on trading penny stocks isn’t all that difficult.

If you work with a broker, your broker will have lots of information on different penny stocks. If you choose to work with a broker when investing in penny stocks, you’ll get monthly updates on the progress of your stock, and always know what the status of your investment is.

In order to trade in penny stocks, and to find out what penny stocks are available for you to invest in, check the OTCBB or Pink Sheets listings. This will help you find information not only on current penny stocks, but other over-the-counter investments that you might want to make. It’s a good idea to check your stock with both the OTCBB and Pink Sheets.

When trading is on, you may want to be prepared to act quickly. Trading in penny stocks can be tricky, so be sure you do your research. It may be a good idea to regularly check stock sheets and watch certain penny stocks before making any investments of your own. This will give you some idea of how certain stocks behave, and let you know what sort of activity you could see with your own investment. It’s always a good idea to thoroughly look into stock, and into any type of stock, before investing your money.

When you know how to trade in penny stocks, there’s nothing to stop you from making your own investment in the stock of your choice. If you’re interested in doing this type of trading, there’s no reason you shouldn’t give it a try. After all, in the end it’s your money, and you can do anything with it that you please.

What are Penny Stocks - Must Read Before You Start

What are Penny Stocks?

The penny stocks are traded mostly outside the stock exchanges such as NYSE or NASDAQ. There are various risks associated with these stocks and if you are looking for an investment in penny stocks, you are advised to go through the risks associated wit penny stocks.

Although there is some risk associated with every investment in financial market, penny stocks are good option for investment if you have some disposable amount, as here a small amount will be at risk. Broker or dealers trade these stocks and it is better to understand the financial terms associated with penny stocks. I would like to add that if you are looking some penny stocks for investment, you should learn more about penny stocks and you can find the relevant information about the subject on stock newsletter and message boards.

Stock Trading: Penny stocks are very speculative and have a market capitalization of around 500 million. These stocks are traded over the counter and the trading is governed by the SEC rules and guidelines on penny stocks. U.S Securities and Exchange Commission have laid down some rules for investment and trading in penny stocks and a beginner should keep these rules in mind before buying or trading in penny stocks.

 SEC Rules on Penny Stocks:  Broker-dealer registration compliance is must before buying or trading any penny stocks. A broker or dealer should get a written request and thereafter should approve the investor.

SEC further rules that a customer desirous to purchase a penny stock should be provided a document mentioning the risk involved in the penny stock. The broker or dealer should also inform the customer the current market rate of the penny stock and the commission that will be charged by the broker.

The provisions made in the appropriate sections also put a mandatory requirement of providing monthly statement to the investor showing rates of each penny stock held by the investor in his account.

Sometimes the other terms such as small caps and microcap are also used for these companies and The United States Securities and Exchange Commission has defined penny stock as a low-priced below $5.0 speculative securities of very small companies.

Many small companies have low assets and offer the stocks at very low price. These low price stocks known as penny stocks are traded over the counter generally in low volumes. These stocks are generally quoted on over the counter systems such as over the counter bulletin board (OTCBB) or pink sheets including foreign exchanges. The Securities and Exchange Commission strictly adheres that penny stock is low priced speculative stock and the term penny stock does not relate on market capitalization or it’s trading at the exchanges (NYSE, NASDAQ) or over the counter.

Penny stock’s definition by the Securities and Exchange commission is strictly on the basis of its value and it does not depend on other parameters such as the companies market capitalization or its listing. Investor should evaluate the risk factors associated with penny stocks before investing in them.