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What Are Penny Stocks and Where Do You Find Them Online?

Penny stocks are basically common stocks which are traded through Over-the-Counter quotation services and have values under $5. Some will call a micro cap stock a penny stock. Micro cap stocks are common stocks of companies with a market capitalization of under $250 million. You must appreciate how these low value stocks are inherently volatile and speculative.

The Over-the-Counter quotation services where you will find most penny stocks online are the OTCBB (Over-the-Counter Bulletin Board) and the Pink Sheets (Pink OTC Markets or the Pink Quote). These are not full stock exchanges like NASDAQ (National Association of Securities Dealers Automated Quotations) or the NYSE (New York Stock Exchange).

It is important that you understand why this is relevant. Often times when stocks don’t fulfill standards of the major stock exchanges or if they fail to file with the SEC (Securities and Exchange Commission), they are delisted and only made available through the OTC quotation services.

This means the penny stocks online you find and trade via the OTC Market do not have the same public data and verifiable financials as stocks on the major exchanges. This makes them highly susceptible to artificial hype and manipulation.

Penny Stocks Online Fraud Scheme #1: Pump and Dump

The first micro cap fraud scheme you must familiarize yourself with is the pump and dump. The basic concept of the pump and dump is that a group of well-connected individuals select a relatively obscure penny stock then hype it so that novice investors buy it up fast. This causes the value of the stock to be temporarily inflated. As soon as the value inflates, the party responsible for the hype sells it off for profit, leaving the poor novices with a crashing stock that is hard to sell (because penny stocks lack liquidity).

Common places to find people exploiting the pump and dump are so-called penny stock newsletters as well as within stock trading forums oriented around penny stocks online. The moral of the story is this: don’t ever take someone else’s word for the value and potential of a stock. More often than not, they’re trying to exploit you. Learn to do your own research and make your own decisions.

Penny Stocks Online Fraud Scheme #2: Chop Stocks

The other scheme you need to be aware of is the chop stock. Chop stocks are when unscrupulous brokers and stock promoters get together to buy ultra low value stocks at an even further discounted price, then hard sell you the stock at a much higher price. Unfortunately, many naive individuals are exploited through the chop stock scheme.

This is why I think it is vital you work with a well-known and reputable broker. Stick with the big and long-time brokers like Fidelity and Schwab. Be very wary of small specialty brokers who aggressively seek your business online.

So I hope you now understand how vital it is for you to not let yourself become a sucker when wading into the shark-infested waters of penny stocks online. You can make money in this business – you really can. You just have to be responsible and cautious as you begin your penny stock studies.

Find comprehensive hype-free and sales-free penny stock tutorials at my free, new online site: Penny Stocks Online

Author: Will Treanor
Article Source: EzineArticles.com
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1. Research
Know what stocks are. Know what company you are investing in. Follow the market – you can download a stock ticker straight to your computer, check quotes online, or look up historical stock prices. It’s good to do some research of the industry or company that you want to invest your money in.

2. Knowledge
Once you do the research, apply it. Pick companies whose industries are doing well. After you research your company and the stock market, be prepared to pick several companies that you want to put your money on.

3. Follow the market
This means follow the New York Stock Exchange (NYSE), follow the NASDAQ, and even stock markets from other countries. Stock prices can change within a day so its important your up to date on your industry or company that you want to invest in.

4. Stock goes down – Sell
Most people keep stocks that are going down because they think it will eventually go up again. Good idea? Wrong! If a stock goes down and your guy tells you the moneys gone, sell it before you lose more! I will say it again, sell bad stocks before you lose more!

5. Stock goes up – Don’t sell
Most people will sell with the idea being that they want to make a profit before the stock price goes back down. No, no, no! Stock prices go up for a reason and if it rises, then ride the wave to obtain maximum profits.

6. Unless you trade keep stocks for the long run
As I mentioned before, buying long term stocks that are well diversified will keep you in the positives. Stock traders make a living trading stock because they are trained. Unless you want to make a living off of price margins dealing with thousands of dollars, stick to buying good valued, long term stock that pay good dividends.

7. Common sense
Always use common sense. If you think you can become a millionaire overnight with the stock market, think again. It takes time, commitment, lots of ups and downs, but in the long run it will be profitable for you if you use your common sense. Pick good stocks and don’t take risks.

8. Analysts Recommendations
Follow analyst and their recommendations. If you want to invest in penny stocks, that’s another story. But buy stocks that have long term value, and following up on a recommendation is a good place to start. The stock market pays those who wait – i.e. if you bought Coke-a-Cola 50 years ago and kept the stock you would be a millionaire.

9. Be smart – Diversify
Number one rule of portfolio management: diversify. Make sure you don’t put all your eggs in one nest. Buy stocks in the financial industry, in the commodities industry, in utilities, gold, etc. Buy stock in Japan, in Germany, the United States, etc. Just make sure your pick of stocks are diversified and the risk is not held in one area.

10. Don’t be down if your stock fails
You are bound to lose some money with stocks. Everyone does. But don’t let it scare you away because there is so much potential. Average Americans don’t invest in the stock market because they fear losing money or don’t know how to use it. Take chances, and if you encounter several bumps along the road take them in stride and learn from your mistakes.

Did you know that over 50% of home investors lose their initial stock investments? Of course its a good tax break but it takes market knowledge and action to be able to make money with stocks. If you want to learn what Wall Street knows about effective stock trading, visit http://www.stocktradingsignals.info.

Author: Tim Karlson
Article Source: EzineArticles.com
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Historians disagree about when in the murky past a stock market was formed. It is suggested by the historian Fernand Braudel that Muslim and Jewish merchants had in effect set up everything that was needed to trade with credit in 11th Century Cairo. Was this trade the beginnings of present day stock markets? In the 12th Century the French regulated and traded debts of agricultural communities. Were these the first brokers?

While the beginnings of stock markets worldwide are shrouded in the fog of history, the history of the American stock markets and Wall Street are much clearer. Boston was the early financial center of America. Bonds and commodities were traded largely by Boston Dealers.

It was not until 1792 that Wall Street became the center of stock trade. It was there that the first organized United States stock exchange was created. Other countries such as England and France had long since established stock exchanges, but this first American stock exchange would grow to become the center of world stock trading.

The New York Stock Exchange was created under a buttonwood tree in what is now Battery Park by John Sutton, Benjamin Jay, and other financial leaders. In 1849 the American Stock Exchange was formed. This exchange was used for many years by companies that did not meet the listing requirements of the New York Stock Exchange.

The American Stock Exchange was purchased by the NASDAQ exchange in 1998. The NASDAQ, which stands for the National Association of Securities Dealers Automated Quotation, was founded in 1971. This electronic stock exchange is now the largest in the world in terms of shares traded.

The markets have had many ups and downs over the years. The most notable crash was the Great Stock Market Crash of 1929. Largely because of very high margin rates, the speculative market began a decline that would eventually lead the to the Great Depression.

The markets have also enjoyed boom times such as the technology bubble of the 1990′s. During the decade, it seemed as if every stock even loosely related to technology saw its price rise many fold. This bubble burst as all bubbles do. There then followed a period of correction which was itself followed by a more normal market.

As this brief history of the stock markets illustrates, the stock market serves as a pricing mechanism with many excesses. At certain times, there exists a buying fever. Prices rise far higher than they would in a more rational market.

At other times, when fear and uncertainty hold the markets in their twin grips, prices fall. Many bargains can be found by the speculator with patience and deep pockets.

A historical perspective of the stock market can help you avoid the pitfalls of extreme market conditions. Such a perspective can also allow you to take advantage of the opportunities these extreme conditions create. Study the history of the stock market and you can become a better investor.

Learn more about the stock market at

http://hubpages.com/hub/Understanding-The-Stock-Market-Today where you will

Find information on this and information more helpful in understanding the stock market.

Author: Chip Westley
Article Source: EzineArticles.com
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What exactly is a penny stock?

A Penny stock is a low priced security for a small company with a market capitalization of under $500 million and usually traded in very low volumes and amounts. Penny stocks also trade on other OTC or  “other the counter” exchanges, like the OTCBB and Pink Sheets.

Due to the low trading volumes, penny stocks are a profitable investment option that comes with a sizeable amount of risk.

According the Securities and Exchange Commission, potential investors in penny stocks should be aware of the fact that due to the low trading volume of these stocks, it is possible that an investor won’t find a buyer for their shares. Finding accurate price quotations are also difficult making it a strong possibility that an investor can lose their entire investment. This is the inherent risk.

Penny stocks do carry a certain appeal for adventurous investors.

Chances are however, a new investor looking for a potentially lucrative short term investments with a low starting price will run across the penny stock.

The allure and excitement comes from the fact that at such low prices any changes are often measurable in hundreds of percentage points in a given day or two. An investor’s stock value can literally grow to double or even triple the original investment amount!

Conversely, the price of penny stocks can plunge in value just as quickly. New investors would do well to avoid making penny stocks a major part of their portfolio.

Also, due to the low listing requirements on exchanges like OCTBB and Pink Sheets, many companies are not really considered safe investments.

Many of the companies listed on alternative exchanges do not have enough financial history to be able to accurately determine if they would make a good investment or not.

In some cases, these companies that are considered to be penny stocks are either new companies or are in some cases dangerously close to failure.

Unfortunately, some new day traders have even taken to artificially manipulating the stock prices by buying up large amounts of a stock which in turn, convinces individual investors of the need to buy.

As most of these stocks are not in great demand, an investor will have to lower the asking stock price in order to entice an investor, often at a financial loss.

Not every company that trades for “pennies” on the stock exchange should be considered fraudulent, however. Some are simply small companies trying hard to grow their business and are working to get up on the larger market exchanges. Searching through the fraudulent companies to find the truly reputable companies capable of helping an investor turn a large profit may not be worth it.

Investors with low investment income may be convinced that just one good trade can double their investment, but in the end an investor is better off choosing an investment from a company that they have researched thoroughly and are convinced that this company’s stock pricewill grow.

Thank you for reading my article,

Cheers!

There are also several possibilities in stock market investment like day trade of stocks, future and option trading, over the counter stock trading, penny stock trading etc.

If you follow classical value investment model for investing stock market, you cannot really multiply your money overnight. To make money quickly, you need to invest in option with proper stop loss and day trading. You can also apply the same concept of future trading for Forex and commodity market.
In this article, you will learn how to pick hot small and madcap stocks because invest in penny stocks gives you maximum profit margin and less risk because you are not committing large sum of money.

What are the challenges in investing in penny stocks?

1. Picking top penny stocks is an approximate science and art and there is a much higher risk when investing in penny stocks.

2. Information available for penny stocks versus those traded on the New York Stock Exchange.

How do you go about finding the top penny stocks?

1. The best way to pick the profitable penny stocks is to combine your own research with professional share recommendations.

2. Before investing real money, practice stock trading on paper.

3. You should subscribe to few top quality penny stock newsletter and financial newsletters.

What’s the most recommended method for penny stock investment?

There are many online penny stock selection services available, you can join them but I found most of their services are not very reliable due to insider trading.

Here is my advice for penny stock investment to your success in wealth building

a. Learn proper money management and risk management while investing in stock market

b. Invest in penny stock just like investment in your own business

c. Do not influence by your emotion.

d. Make a proper investment goal.

Author: Arindam Chattopadhyaya
Article Source: EzineArticles.com
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But something has been bothering me lately, and it’s the outrageous claims that purveyors of penny stocks are claiming. In looking advertisements for these stocks this morning I came across some astounding claims; one firm promised 3000% return on their stock investments, another firm touted a 900% return on their investment choices, and yet another firm claimed day 1200% rate of return on their investments. Common sense tells us that returns that border on astronomical are highly unlikely. After all, if it were possible to attain these returns why are all investors not fully invested in these investment schemes?

Penny stocks are generally traded on the “pink sheets” and thus are not subject to the stringent reporting requirements the principal exchanges require. For this reason, stockbroker’s are allowed to make claims that would otherwise be illegal for members of the New York Stock Exchange or the NASDAQ to publish. Of course, you do not see member firms of the major exchanges touting outrageous rates of return on their investments; it is simply not allowed.

So why do these penny stock firms tout such extraordinary rates of return on some of their investments? The answer is a simple one; because they can. These fantastic rates of return are designed to entice unknowing investors into plunking their hard-earned money down on these risky stocks, which are among the riskiest investments in the investment continuum. Depending upon which a scientific study you read, 8 out of 10 of these stocks fail within two years of going public. Granted, a few stocks perform quite well, but discerning exactly which stock will skyrocket in price is dicey business. It is difficult, at best, for even the best penny stock firms to determine which stock will turn in excellent performance.

So I object to the use outrageous claims that these stock firms trumpet when advertising their services. The truth be told, these stocks are among the riskiest investments you can make and the vast majority of this class of stocks end up the worthless. In my opinion, these ads are misleading and would have the unsophisticated investor believe that all penny stocks are real moneymakers. Nothing could be farther from the truth, and I feel like purveyors of this class of stocks should disclose this fact to potential investors.

Further, there can be some irregularities in the actual trading of these penny stock issues. Since they are traded on the pink sheets, there is often a question of who is making a market in these issues. Often times, the firm making the market in these stocks is also the firm buying the stock back from investors. This is, of course, a bona fide license to steal. Oftentimes, there is a wide gap in the bid and ask prices when buying and selling these stocks. The differential between the bid and ask prices is little more than pure profit for the firm involved in buying and selling the stock. As I have said, the same firm may, in fact, be both buying and selling the stock simultaneously. So the spread between the bid and ask price is often pure profit for the firm involved.

On a final note, many penny stock companies higher public-relations firms to distribute dubious claims as to the fantastic success the product the penny stock company is selling in an effort to pump the price higher than might be expected. This make sense because oftentimes these public-relations firms are paid in stock from the firm and it is in their best interest to inflate the stock price to increase their profits. This technique is often referred to as “pump and dump.” Penny stock investing is rife with firms engaged in pump and dump activities, so any information received from third-party sources promoting penny stocks should be taken with a grain of salt as its accuracy can be dubious, at best.

My recommendation is to avoid penny stocks, no matter how enticing they may appear. All that glitters is not gold, and penny stocks are certainly no exception to this rule.

Author: David S. Adams
Article Source: EzineArticles.com
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When was the first stock market formed? The answer to this question is a topic of huge debates. Historians debated over this issue but no universally accepted solution was found. But the US stock exchanges have a clear view and recognized history. Initially the government of US started the stock market during the World War I. Bonds were traded to fund the war. These bonds were open to private investors. During that period major banks were also working on the similar project. But in the year 1792, the Wall Street recognized as the center for stock trade. In this year a group of 24 merchants entered into an agreement called as “Buttonwood”. They formed the first organized world stock trading center. This organization was named as New York Stock and Exchange Board which is now known as New York Stock Exchange.

The London Stock Exchange was formed much earlier than the NYSE but it was not well organized to provide enough ground to be called as center for world stock trading. The stocks in London were traded in the coffee shops in the streets of London. After its establishment NYSE became the powerhouse for stock trading. Over 200 years NYSE is the most powerful financial institution and leader among all the other stock exchanges.

In the year 1849 another stock exchange came up in US by the name of American Stock Exchange. This exchange was used by the by companies that did not find space with New York Stock Exchange. But this exchange was taken over by another exchange National Association of Securities Dealers Automated Quotation (popularly known as NASDAQ) in the year 1998. NASDAQ was the first exchange formed in the year 1971 that provided electronic platform for trading stocks. NASDAQ is now the largest exchange in terms of share traded and companies enlisted. Most of the exchanges offer the trading electronically. And for all this the credit goes to NASDAQ innovations.

Since the ups and downs are also the part business. Stock Market too saw both the phases. Moreover this market was primarily was called to be accountable for the same. The most terrifying slump in the economy was the crash of 1929 that then gave to the Global Great Depression in the World’s economy. Another example could be the present time when we all are facing global slow down. Recession has spread its wings all over the world. Consequences can be seen the stock market and somewhere this market has influencing share of responsibility for the call of this recession. The stock market experienced the boom phase in the 1990′s when the technology was growing at the lightening fast speed. It was then where the stocks of the companies not related to technology were also touching the sky.

History of the stock market revels that how the different economic phases can be dealt. Whether it is the time for slowdown or boom, trading in the stock market can be learnt from the history.

History of stock market is quite interesting. There are several benchmarks in this long history when different stock exchanges in the world were formed.

Author: Micheal James
Article Source: EzineArticles.com
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Before you dump your life savings in this market though, there are some important facts of which you should be aware.

1. You can easily become a victim of an overly biased recommendation as many of these stocks are hyped by specialized firms who make their business by pumping low priced stocks up. These firms use a variety of mediums to accomplish their task, including newsletters, the Internet, and various media outlets. As a veteran of the stock industry, I can tell you that most of these firms are paid in shares of the stock they are pumping. Quite simply, they have a vested interest in pushing the price of the stock higher regardless of the merit of the individual stock.

2. Speaking of the merit of the individual stock, one of the greatest disadvantages of these stocks is the complete lack of transparency in company reporting. The vast majority of penny stocks are not regulated by the Securities and Exchange Commission. This means the stock companies do not have to submit audited reports of their assets, changes in overall cash position, and a variety of other reports that regulated firms are required to submit on a quarterly basis. Short of and physically visiting the firm, there are a few methods for verifying information about these stocks.

3. Another major issue in the penny stock at market is liquidity. Some stocks are very thin and it is difficult to exit at a specified price. Additionally, there can be a very wide bid and ask spread to contend with. The reason for the wide bid and ask is varied, but it is not unusual for one small investment bank to be on both sides of the spread. This can cause a major problem for investors has competition to narrow the bid and ask spread is zero.

4. Since these stocks are not subject to reporting requirements they are often in financial straits and are not required to disclose this fact to potential investors. Depending upon which source you choose to believe, as many as 7/10 penny stock companies are bankrupt within three years. Of course, penny stocks usually have limited assets. As an investor you will probably get very little in the event of the companies liquidation.

5. Since most that penny stocks have a very short history and there is no financial transparency in their reporting requirements, it can be very difficult to pick the proper stock. Most penny stocks are bought on recommendations from either honest purveyors of penny stock information, or from “pump and dump” firms who are hired to create a media blitz for the penny stock.

There is a considerable amount of money made in the penny stock market, though most of it is not made by investors. For the above reasons, it can be very difficult to make a living in this treacherous environment. On the other hand, if an investor could find a honest purveyor of penny stock information, one who has experience and access to quality information, I would imagine that you could make a considerable amount of money in this market. Of course, there seem to be many obstacles to success in the penny stock business, which is why it enjoys a less than stellar reputation among professional investors, who typically avoid this section of the market like the plague.

But as I have said, under near-perfect conditions there is money to be made in the penny stock business. If only the problems of financial transparency, company history, and then markets could be overcome by knowing or hiring a true expert in the penny stock arena. To me, it would appear to be a difficult arena in which to compete.

Author: David S. Adams
Article Source: EzineArticles.com
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In a stock exchange the stock or shares of companies are listed and can be traded i.e. bought or sold. Depending on the economic performance of the company and its financial health as well as economic and investment scenario in the country, where the stock exchange is located, the shares listed have a certain market value. These share prices fluctuate depending on a number of factors including market health, investment climate and company performance.

On a stock exchange we have something called the average value of all companies listed. This is the index number. It’s a statistically calculated reference number. It is calculated on a daily basis. This reference number is the stock index of that stock market for that day. This number varies and has a liquidity of its own .In fact in case it is plotted on a graph it will show a zig zag result. But a central line through it will show whether the stock is stable or going up or going down. There is lot of talk of the market going ‘up’ or going ‘down’. When the market goes up it means that the ‘bulls’ are in action and if going down the ‘bears” hold sway.

The index number of the stock exchange is a summary of the market and the financial health of a nation. It encompasses the total value of the stocks that are listed. Presently some of them have become a bench mark for evaluation of a nation’s financial health. They are often referred to when an investment is to be made or loans granted to a nation.

Two of the most famous market indices in the world are American. They are Dow Jones Index and SP 500 index. Charles H. Dow takes the credit as the man the Dow Jones Index in 1896. At that time Charles calculated the index by a simple method. He added all the stock prices and then divided the total by number of stocks listed. Presently the system is a little more complex and the calculation takes into account the market weightage of the stock. Also the Index refers to the heavy weight i.e. stocks that have the greater value and market capitalization.

Other market indices are also well known.They include the FTSE of Britain, CAC 40 of the French republic, DAX for Germany and Nikkei 225 for Japan. Among the emerging markets NSE Nifty is important from India.

An index is an imaginary number that represents portfolio of securities that are listed on the exchange. This number is like a reference bench mark that is used by investors and CA’s and money managers to assess the state of health of the financial market of a country. The creation of this benchmark has also encouraged a large number of investing population to opt for the first time in investing in stocks, despite having very little financial knowledge. There are now indexes for technology stocks, pharmaceuticals etc also. In 1985, the NASDAQ introduced its own index to compete with the S&P. The Nasdaq 100 contained more companies from the technology sector. The NASDAQ itself has been growing in importance as both the computer and the internet have taken technology inside peoples homes.

Presently the names of indexes such as the Dow Jones Industrial Average

(DJIA), S&P 500 and NASDAQ composite have become part of our everyday vocabulary. For example, two of the best known indexes for the stock market in the United States are the Dow Jones Industrial Average and the S&P 500 index. These are Global standards.

Indexes help track the performance of the market. So, if you hear that the S&P 500 was up 5%, you know that the stock market (as represented by the S&P 500) has gone up around 5% in value.

The impact of indexes on investing is huge. This is because these indices from Tokyo to New York have brought about greater transparency all around. Other prominent indexes include the DJ Wilshire 5000 and the MSCI EAFE (foreign stocks in Europe, Australasia, Far East). Each index has its own methodology for calculation and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

Presently Standard & Poor’s 500 is one of the world’s best known indexes. This index is a bench mark for a lot of experts around the globe. The challenge for investors presently is not to get reliable market information, but how to utilize the information available.

Author: Madan G Singh
Article Source: EzineArticles.com
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