Penny Stocks: What it is and why it matters

Penny Stocks Meaning

Penny stock is a kind of stock that is being bought and sold for a very low price, not more than $5 per share. Penny stocks tend to rise in value speedily but when there are unexpected delays, the worth may possibly also fall speedily.

Penny Stocks Basic Terminologies

Knowing the jargon of any trade is one of the first steps in truly understanding it. Here are a few of the more important things to know in trading penny stocks.

• Ask – a term used to indicate the amount or price in which the sellers of the penny stocks are willing to sell their shares of stock to the buyers.

• Averaging Down – a term that pertains to a strategy wherein the owner of the penny stock continuously buys more of the same penny stock because the share price of that penny stock has been continuously decreasing.

• Risk Tolerance – a term used to describe an investor’s quality which measures how much he is willing to speculate and put at risk his investment.

• Blue Chip Stocks – a term that describes the stocks owned by corporations that are deemed stable and less risky than other corporations. They usually have a large market capitalization.

• Bid – a term used to indicate the amount or price in which the buyers of the penny stock are willing to buy the shares of penny stock from the sellers.

• Delisting – a term used when a stock has been removed or stopped trading in a particular stock exchange. A stock may be delisted because of several reasons: the corporation did not meet the requirements of the stock exchange, transfer of the stock to a new stock exchange, or another corporation takes over the stock.

• Duration of Trade Order – a term used to describe the amount of time a stock order can be valid for. Most stock orders are valid until the end of the trading day however an investor can extend or shorten the validity of his order by informing his broker.

• Speculation – a term which means to risk or take a chance or gamble your investment on a stock or corporation.

• Halts – a term used to describe a phenomenon where a stock stops trading. Companies usually request a halt in trading their stocks because of important information that is released by the company which oftentimes greatly impact the stock prices.

• Large Cap Stocks- is a term that refers to stocks that are owned by large cap corporations or large capitalization corporations. Large cap corporations have a market capitalization of hundred millions as opposed to small cap corporations that have a market capitalization of $50 million or less.

• Limit Orders – a term used to describe a situation where the investor has instructed his stockbroker to only buy or sell a particular volume of stocks when or if it reaches a particular stock price.

• Takeover – a term used when a corporation buys all the stocks of another corporation with the intention of owning, acquiring and managing the sold out corporation.

• Market Capitalization – a term used to indicate a corporation’s worth. It is calculated by multiplying the price per share of the stock and the total number of shares of the corporation.

• Market Orders – a term used when an investor places an order to buy or sell shares of stock without specifying any desired amount of the stock price. In a market order the investor gets the best possible market price of the stock at the time he placed his order.

To limit losses In Penny Stocks

1. You need to know a whole lot of info regarding the stocks you’re getting

2. You must be able to comprehend the risks involved in stocks trading

3. You ought to be familiar together with the stocks trading approach

If you wish to be profitable in Penny Stocks, you must know a number of the troubles encountered by investors. As an example, you’ll find occasions when the stock’s cost soar or drop all of a sudden.

If you’re caught within the trading process, it is possible to either shed a lot of money or acquire large profit. Considering that the marketplace is actually a fast-paced environment, delays frequently occur which in turn slows down executions as well as trade confirmations. Should you strategy to purchase or market stocks, you should location a limit order instead of industry orders.

Do not try to acquire or promote stocks at an extremely high or really reduced value. Take note from the limit order in order that you won’t drop large cash.

How does the limit order function?

Suppose you positioned a stock order for $10. Using the limit order, you will not end up paying a greater value like $35.

It is possible to also apply the limit order when you’re promoting stocks. When the limit order or target limit is hit, sudden losses could be eliminated. Nevertheless, there’s also a chance involved in putting limit orders.

You can not hold several of the stocks at longer intervals even if you desire to wait until finally the cost in the stock rises. You see, when the target is reached, the stocks are automatically sold.

On-line trading does not give immediate outcomes. There are also dangers involved in online trading. Instant stocks trading could be affected by issues with servers, modems, and delayed hardware between the broker and dealer.

You should know some efficient trading options just in situation a problem interrupts the transaction.

You will find times when the order is delayed and so they wind up producing double orders or double selling. Because of this, you will find occasions when the investor is in a position to buy stocks that they do not like or they offer stocks which might be not even theirs.

If you’re not really certain if the transaction was completed, regardless of whether you are purchasing or promoting, you need to quickly check using the broker.

You have to possess a broker who can efficiently handle stocks transactions quickly. The fast-paced industry doesn’t have space for slow investors.

There is no time limit with regards to trading. You are free to create investments at any time and on any sort of stock. It is your responsibility to pick a great Stock broker who can help you along with your investments.

Assets are very essential to investors. You need to make certain that you’re coping with the top broker in the industry. That way, you will obtain more earnings with stocks trading.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges.

As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Past performance of securities/instruments is not indicative of their future performance. This post is only for Educational purpose.