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stock images guide |
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The Difference Between Penny Stocks And Small-cap Stocks
By Scott
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Comparison of micro cap and small cap
to determine best route for investors.
The SEC defines a penny stock as a security that is low priced
and speculative that is traded in places such as the OTCBB and Pink
Sheets. Its not so important if a stock is traded on a major exchange
or not since what really makes a penny stock what it is, is the price
and not necessarily the exchange which it is traded on. Its anybodys
interpretation what exactly is a penny stock since there is no standard
figure. Its generally accepted that its anything trading under a
dollar. Go figure right. The biggest money to be made in these is in
conjunction with any news released about the stock since penny are
quite sensitive. Because they are so sensitive, small investors have
the advantage.
There is a right way and a
wrong way to play
these cheap stocks. The thing to keep in mind is that any movement in
the stock in general is amplified exponentially in penny stocks. So if
the market goes up then penny stocks go up even more. If the market is
down then penny are way down. This is a generalization of course but an
accurate one. Trading of penny is influenced by the market demand in
the OTC rather than the traditional stock exchange processes.
Penny
are bought and sold at a number of different prices. This is
definitely different than normal trading prices you may be used to.
This can become a headache to keep up with if you are doing some online
trading and trying to buy and sell at just the right time. That is why
its always a good idea to set limits so that you dont unwittingly get
burned during a transaction that was in process while prices were
changing.
Penny
are not always as transparent as small caps are. Penny
do not have to abide by SEC reporting rules and so the
frequency of financial statements may be erratic or nonexistent.
Sometimes it seems the only thing that penny
are releasing is press releases to generate some stock market excitement.
The purpose of this article was not to turn you off of investing in penny
but simply to highlight the differences in trading and level of risk. Penny
will continue to present some exciting investment
opportunities and attract those with a high risk tolerance. As always
never invest more than you can lose and diversify your portfolio. |
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Here are some articles to start with.. |
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How To Find The Best Paying Dividend Stocks
By Tim C.
When it comes to knowing which stock is the best for you, it is important that you take a close look at the history of the company's stock dividend. Read more...
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Mutual Funds Vs Stocks, What's Your Investment?
By Randy
The generic question in the investment world is generally Mutual Funds or Stocks? Having a diversify portfolio is generally the answer but is it? Find Read more...
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