The textbook definition of a penny stock can actually go up to five dollars per share too. It involves small companies so that they can trade infrequently. These penny stocks also trend on exchanges like the OTC markets, and the Over The Counter Bulletin Board. This was earlier called by the name Pink Sheets.
Penny Stock Traders Have The Need; The Need For Speed!
Penny stocks are very dynamic and can move from high to low in one single trading day too. So the traders need to make decisions instantly to gain profit, otherwise, the stocks move and they may face a loss. This is like every other stock exchange.
You can encounter the typical rise and fall of stock prices based on supply and demand. The number of traders bidding on shares of a penny stock determines the price. So the greater the number of traders, the higher will be the price of the stocks.
The only major difference from the other big board listed stocks is that this can be very unpredictable and rapid. This usually happens at an extreme rate as the pace of buying or selling goes to the maximum in penny stocks. The trends of penny stocks today is not new yet not too many people are aware of making profits in this market. Also, not many companies have become exceedingly successful so this could deter longer-term investment in penny stocks. On another hand, penny stocks have very low liquidity, which makes it a risky bet as well.
When you want to invest in penny stocks, good research about the company that is issuing their stocks to you is required. If you invest in the right company after clear research, then you can make a substantial profit in very little time. It can happen even within one single day. You can become a successful penny stock trader when you are quick enough to predict. Penny stocks can change in just a fraction of second. So a very strong penny stock trading strategy is essential to make good profits.