There are several definitions for Penny Stocks, and you will find that everybody has their own set of rules about what defines a Penny Stock. Some say that Penny Stocks are stocks with a price of less that $5. We say its stocks about $1 or less, most are also considered micro-caps.
Here’s the deal, Penny stocks are extremely risky, the marketplace for Penny Stocks typically the OTCBB, PINK SHEETS is full of fraudulent activity and you can lose everything put into an investment.
That being said, they are also extremely lucrative when you trade the right ones the right way. A stock that is a Penny is very affordable to most people. Penny Stocks go from 1 cent to 2-3 even 10 cents frequently. Well thats a 100 to 1000% gain. Price moves like this happen all the time with Penny Stocks, they do not however happen all the time on the NYSE and NASDAQ markets.
So to sum it up, Penny Stocks are not the type of stocks you would typically invest in for longterm, but when getting in and out the right way, the profits an investor can make can be huge if they are willing to do their homework and take the risk.
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