Learning the Basics of Penny Stocks

Penny stocks are stocks that are either low in value or low in the total market capitalization. The definition of penny stocks can vary a bit from one person to another. Generally, penny stocks can be understood to mean any stock that is not a major stock. The two criteria that we have set above will determine whether a stock is a penny or not based on its price and market capitalization.

In addition, one can also consider a stock as a penny stock if it does not conform to stock exchange regulations and are thus more risky. In practice, however, it would be extremely difficult to find a large market stock that is not meeting the major stock exchange regulations. Because of this reason, penny stocks are generally understood to be those stocks whose absolute price or market capitalization is very low.

The next question that arises is ‘how low is low’? Obviously this is a little subjective and also prone to change from time to time. While there are no hard and fast rules, we can follow some rules of thumb. However, you must remember that not only are these rules not sacrosanct but also are likely to keep changing over time. Having said that, we can set some rules of thumb for considering a stock as penny stock. Any stock that is below a certain cut off price is considered as penny stock.

The cut off price is a matter of opinion. Some consider any stock below $5 to be a penny stock, while others are more liberal and consider only those stocks that are below $3 to be penny stocks. There are still others who would rather set the limit at $1, considering any stock above $1 as not a penny stock. Similarly, in the case of market capitalization, various limits are set by various people. In general, we can consider any stock with a market capitalization below $300 million to be a penny stock.

There could further classifications within this group, with stocks having a market cap of below $50 million being considered a step below penny stocks and classified as nano-cap stocks. The general idea is that any stock having a low per stock price or low market capitalization would be considered as a penny stock.

In case you are wondering what is market capitalization, here’s some information that would help you. Market capitalization (or market cap for short) is the total value of all outstanding stocks at the current price. Suppose a stock sells at $10 and there are 100,000 stocks outstanding, the total market cap would be 10 x 100,000 or $1 million. Market cap is an important indicator, because the greater the total amount outstanding the greater the stakes.

If a large number of people or a large amount of money is involved in a stock, the chances are that there will be greater control on the stock. There is one exception to this. If the stock is not traded on a regular stock exchange like NASDAQ, it is not under any regulatory control to comply with a number of regulations that have been designed to safeguard the interest of the investor.

In these cases, even if t he market cap or the price is large, there may not be sufficient safety. In general, however, we can assume that for large market cap stocks the possibility of being outside the purview of a recognized stock exchange are very remote. The reasons for this, as well as the reason why penny stocks are considered risky will form the subject matter of our next article.

Learning More about Penny Stocks

There’s so much information out there on different stocks, and advice on how to play the stock market. But which advice do you trust, and how do you know that you’re getting good advice? When it comes to learning more about penny stocks, do you know where to start?

Finding out what penny stocks are, and how to trade in them, is the first step in trading penny stocks. After all, if you’re going to invest you want to know what you’re investing in and the best way to do it, right? This only makes sense. But many investors want to learn all they can about stocks, before they invest their valuable money – and their time, which is sometimes even more valuable than any amount of money.

So how do you go about learning more about penny stocks? A good place to start is the Internet, and not those spam e-mails that talk about penny stocks – never trust those. But there is valuable information to be found online and knowledgeable people who will answer any questions you may have. The Internet can always be a valuable source of information on any topic – as long as you remember not to trust everything you read you find online. It’s always good to double and triple check any facts you unearth online, just to be on the safe side.

But for chatting with others and learning public opinion, there is no better forum. And isn’t talking to fellow investors the best way to learn about investing? Those who have played the market using penny stocks are the people who will be able to offer you the best information and advice. They can tell you what they did, and perhaps even answer questions.

You’ll find online forums, chat groups, discussion boards, and entire sites dedicated to investing in all kinds of stocks. You may even be able to find some penny stock-dedicated forums and groups, where you can learn about the stock type that most interests you. This is a great way to find out what real people are saying about their stocks, and if they’re actually making any money with them. Some people may brag about huge returns and this sort of information should perhaps be taken with a grain of salt, unless stock numbers seem to match their claims. As you talk with people and learn more, you’ll become more and more familiar with the penny stocks of your choice.

After all, it’s not like you can just take your broker’s word for it. When it comes to your money, you should learn all you can about where you’re investing and what you’re investing into. The Internet is a great source of information, and you can look up penny stocks and penny stock information online as well as chat with other investors. There may be some false information, but there is a lot of really good information – and the only way to find it is to look. Talk to others, and learn more about penny stocks before you invest. It may help you may bigger profits and enjoy bigger returns, as a result.