subject: Penny Wise-Market Bullish [print this page] Penny stock trading, a term used in many markets across the world, refers to the share in a firm which trades for less than $5.00. The range may vary as some companies' trade for even less price per share. The definition is never established as a norm as in an extremely volatile market some corporations having share prices over $50.00 still prefer to trade for only a few cents. There are others with huge turnovers and massive market capitalizations following the same method.
Micro cap equity is another apologetic term for penny stock. Perhaps to ensure traders and shareholders continue living in a world of serious and oh-so-corporate' terms of foolery. Investors appear to have their preferences attached with micro cap equities mainly because they are more volatile, make frequent changes in a short time span, and do not demand much initial investment. Others less trustful with their instincts usually maintain distance from such type of trading because to them the implicit firms are not secure and fundamentally trustable, they consider the volatile nature too much to rely on, and the companies themselves don't help better the situation by not paying dividends. Healthy fodder indeed, for some economist to keep speculating over.
The Pink sheets markets that are among the ones trading under the penny stock system have their share prices displayed on the over-the-counter bulletin boards OTC BB stocks. It is used by brokers or traders who subscribe to it to look up prices, enter quotes, along with obtaining information about the last sale prices, quotes etc. The share prices are easily manipulated and leave a considerable scope for fraud. Hence the penny stock investors avoid trading and listing on these manipulative waters. Once eligible they prefer listing themselves on more established exchanges like NASDAQ, SEC, New York Stock Exchange etc. Stocks of unreported companies are displayed on the OTC bulletin boards. They are mostly quoted on both the OTCBB and Pink sheets.
Keeping in view the risk-reward aspect, trading through penny stocks is more like net practice for the amateurs. As the amateur turns professional he moves towards the more serious domain. Big brands and the lesser known ones, both have their one night stands with such trading methods. The big ones want to have their presence felt among the minor investors (brand publicity perhaps) and the lesser known have nowhere else to go for the time being. It is cyclical chain populated by cynical capitalists.
