9/1/2023 0 Comments Stock scannerzLiquidity is also a concern when trading penny stocks. Keep in mind that rumors and bits of news can create huge price movements in the penny stock market in a way that they wouldn’t be able to on major exchanges. It’s essential to do your due diligence to decide whether a company is real or a scam, and whether its growth potential justifies the current share price. Unlike stocks trading on major exchanges, there’s no guarantee that you’ll be able to access detailed or verifiable fundamental data for companies trading as penny stocks. That means that you need to be extremely cautious to vet the companies you’re trading. In fact, one of the two largest penny stock listing services, Pink Sheets, doesn’t enforce any requirements around market cap, share price, or other safety factors on the stocks it lists. SEC regulations are much looser since most penny stocks are traded on a quotation system rather than an exchange. Trading penny stocks is significantly riskier than trading stocks on major exchanges. What Should Penny Stock Traders Look Out For? But, beware that many companies issuing penny stocks have very little cash on hand and may or may not have an established market. These stocks are usually issued by small companies trying to raise money from public investors, in the same way that larger companies issue stocks on the major exchanges. What is a Penny Stock?īroadly speaking, penny stocks are any stocks that trade for less than $5 per share on over-the-counter (OTC) markets. In this guide, we’ll explain everything you need to know about trading penny stocks and show you how to set up actionable penny stock scanners with Scanz. While these types of stocks present their own set of hazards, such as low liquidity and often murky company fundamentals, cautious traders who know what to look for can find success in trading penny stocks. Penny stocks present an overlooked and potentially extremely lucrative opportunity for day traders.
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