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What are Penny Stocks?

Info by Never Rich Enough | 08/05/2012 at 14:05

Shares with a low value are called penny stocks. Normally we talk about penny stocks, if the value of the shares is under one unit of the appropriate currency.

Therefore, in the euro countries shares with a value less than one euro, are designated as penny stocks. It is different in the USA. Here, shares under $5 are already called penny stocks.

Since penny stocks with a low trading volume are often subject to wide price fluctuations in a short time, penny stocks are often traded by speculators hoping to get in for a cheap price to sell the shares after a huge price jump.

Before embarking on such transactions, you should consider, that the information policy of many companies operating in the penny stock range is very badly and a stock endowed at 0.01€ can also fall down to 0.001€. Thus, it can happen very quickly that the shareholders are losing the confidence in the company and the stock still descends much further. Just because a stock is cheap, this does not mean that there is only the way up. I speak from experience.

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