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Newbie Question

Gene said: "What are penny stocks? Why ar they dangerous to trade?"

HappyHarry said: "Commonly any stock under $10 is referred to as a "penny stock". Nowadays, though, it generally refers to stocks that sell .OB or over the counter. Most of the stocks are literally pennies per share. The main danger is that many of these companies are scams, and its nearly impossible to pick the right ones. If you are a technical trader, you can make money in the price movements, but usually the companies have very shaky operating histories."

InvestorMan said: "[SIZE=3][FONT=Trebuchet MS]Penny stocks are not dangerous to trade... if you pick the right ones.[/FONT][/SIZE]"

HappyHarry said: "[QUOTE=InvestorMan][SIZE=3][FONT=Trebuchet MS]Penny stocks are not dangerous to trade... if you pick the right ones.[/FONT][/SIZE][/QUOTE] But if you pick the wrong ones....oh man! Look out below ;)"

InvestorMan said: "[SIZE=3][FONT=Verdana]You're absolutely right, Harry... "look out below". On the other hand, the risk/reward scenario in investing is not necessarily true. What does that mean? If you trade markets [B]randomly[/B], then with greater potential for reward will come greater risk, and vice versa. If you trade penny stocks, there is great potential for huge profits, but if you buy these stocks without doing enough research or without having enough experience, you are basically betting blind, and, with that huge potential for reward comes an equally huge potential for loss. You can tilt the balance in your favor, though. Learn as much as you can about trading these kinds of stocks, do diligent research on stocks you are considering buying and, if you think you have a good strategy, paper trade your strategy for a while until you are confident you know what you're doing. If you are smart enough and disciplined enough, you can still get that same great potential for reward out of penny stocks, but with much less risk. In the long run, this will pay off for you. Or you can simply hire a good investment specialist to advise you. That way, you can take advantage of their expertise and fast track your way to great profits.[/FONT][/SIZE] :D"

AlfredSokol said: "The main problem I have with Penny Stocks is the lack of reporting. Its tough to find out accurate info on many of the companies."

sp0om said: "I'm with you on that one. Seeing a bunch of grey links on yahoo finance when looking those companies up always give me a bad vibe. I'd like to know at least a little about a company instead of just looking at the chart..."

InvestorMan said: "[QUOTE=AlfredSokol]The main problem I have with Penny Stocks is the lack of reporting. Its tough to find out accurate info on many of the companies.[/QUOTE] [SIZE=3][FONT=Verdana]Yes, that is a problem. "No news is good news" is not true in the investment world![/FONT][/SIZE] :rolleyes:"