Stocks traded below one euro or one dollar are called penny stocks. These can be shares of insolvent companies, as they were to be found, for example, after the bursting of the Internet bubble numerous, but also of companies that save a complex IPO and seek with a so-called stock market coat and smallest stocks directly investors. Pennystocks are very rare in the stock exchange indices, trading takes place on the so-called open market – without binding rules.
Where and how can you trade penny stocks?
Pennystocks are preferably traded OTC, i. investor protection in accordance with the German Securities Trading Act is restricted. This unregulated free market via broker platforms therefore entails great risks for investors, but is the easy way for small and innovative companies to find investors in the open market. In order to trade and succeed with penny stocks, an in-depth search of the company should be undertaken. This includes not only the trading price of the share, but also the trading volume, ie the product of the number of shares and the price. Above all, the story behind the company is important and should be studied carefully. The trade in penny stocks of insolvent companies seldom brings the big profit and yet these stocks find buyers again and again.
Pennystocks – Does this investment make sense?
Trading on a large scale or solely penny stocks is a highly risky issue, and yet special platforms have evolved on the Internet. The relatively small price, sometimes only fractions of a cent, entices you to invest, especially since it can always be a stroke of luck. For beginners, this trade is not suitable because the unregulated free market, i. it is not compulsory to make issue brochures and annual reports, it is simply too risky. For professionals, however, financing in small, innovative companies offers a real opportunity to hit the bull’s eye and become investors of the first hour. Trading Pennystocks therefore has a lot to do with know-how, research, patience and risk-taking.
Pennystocks are very low trading stocks traded on the Open Market. On the one hand, these shares can come from companies that have suffered a fall in value due to bankruptcy, on the other hand, small companies can find investors so easily to finance long-term developments. Trading Pennystocks is a high-risk and long-term business. It is not subject to binding rules, is susceptible to speculation and thus large movements that can range from total loss to huge profits.