Is there a difference between trading regular stocks and penny stocks?
I currently own a few shares in the NYSE but have been looking at getting into penny stocks….Is there a difference in the buying and selling process?
My common order type is limit. Is that available?
Thanks in advance.
Yes, the difference is in the price they trade at. The official definition of a penny stock is a stock that trades for less than $5/share. However, people commonly believe it applies to stocks trading for less than $1.00. These true penny stocks (less then $1) are never of investment quality and the great majority of investors simply lose their hard earned money to unscrupulous promoters who make a mint on hyping them, because there is no underlying value in the company.
Yes, even penny stocks can be and are usually bought on limit orders rather than market orders, due to their greater volatility. No difference in the buying and selling process, but some brokers (even online) charge a higher commission for those very low priced stocks.
January 27th, 2012 at 5:23 am
no difference in buy/sell procedure…just be careful to buy a quality stock…they are there in pennies you have to look for them though…don’t pick losers or listen to media BUZZ, unless you are a quality day trader that is.
Edit: I smile at these totally negative views of pennies. Of course you have to be careful of the quality of pennies but you have to be just as careful about higher priced stocks as well….HAS NON-PENNY BAC been a great investment over the last 3 years….Citigroup is that a great non-penny….what about Kodak ,,,it was a rock solid stock back in the 1990’s that is now bankrupt….anyone want RIM at $17 now.
The risk of any stock is there…it does not mean a dollar value on a share price is a guarantee of a successful investment.
The example given that investing $1000 in 1000 stocks worth $1 for a 30% gain is the same gain as one stock @ $1000/share making 30% while mathematically true….I venture I could find 100:1 more stocks that gain 30% in one year at the $1 range than at the $1000/share range.
The object of this game is to find QUALITY stocks for investment…and they exist at all levels of price. But it is not a guessing game…you have to develop tools to be able to find the stocks and to determine when to sell as well. The tools include Fundamental and Technical analysis principles.
IF YOU ARE NOT PREPARED to invest your time in learning how to invest, you will lose your shirt no matter what level of share price you decide to invest in…..PERIOD.
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January 27th, 2012 at 6:06 am
trade nickels, those are the best!
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January 27th, 2012 at 6:55 am
Penny stocks are usually small time companies who cannot satisfy the reporting regulations of the SEC and the major exchanges.
In other words, they trade as penny stocks because they are either unable to present a complete picture of their operations, finances, debt, and forecast. They are unregulated. This means HIGH RISK.
Some companies that are in difficulty and not making their numbers could fall into the penny stock range – but they fell for a reason – poor performance. Again, it spells HIGH RISK.
Do consider the situation carefully before you enter into this very dangerous world.
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January 27th, 2012 at 7:17 am
Yes, the difference is in the price they trade at. The official definition of a penny stock is a stock that trades for less than $5/share. However, people commonly believe it applies to stocks trading for less than $1.00. These true penny stocks (less then $1) are never of investment quality and the great majority of investors simply lose their hard earned money to unscrupulous promoters who make a mint on hyping them, because there is no underlying value in the company.
Yes, even penny stocks can be and are usually bought on limit orders rather than market orders, due to their greater volatility. No difference in the buying and selling process, but some brokers (even online) charge a higher commission for those very low priced stocks.
References :
January 27th, 2012 at 7:29 am
Penny stocks are for people who want the fast way of making money and dont understand investing. Most lose more money than they make.
Or they just dont have enough money to buy quality companies
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5 years investing experience
Finance Major
January 27th, 2012 at 7:35 am
Say you buy 1000 dollars in a penny stock and make 30% back on a swing trade thats 300 dollars.. same if you buy a stock over 1 buy 1000 $ in shares 30% is still the same…
And no they are not right penny stocks are not for people that wanna lose anything you look at what stocks are tending and buy them on a down point or when they are over sold. and sell them when they pick up in price as a new guy with a trending stock with a high low i would sell at around 20% don’t get greedy thats why day traders fail.
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xD my head? math?
January 27th, 2012 at 7:42 am
Yes, there is a difference, the risks are considerably higher. Penny stocks are not regulated and there are lots and lots of scams out there, while you can make a lot of money, you can risk losing all of your money if the company goes belly up or if you were the victim of a fraud.
Stick with NYSE/NASDAQ stocks, avoid NYSE/NASDAQ listed Chinese stocks, and you should be OK.
Penny stocks are not safe (at least that’s my opinion). Read here: http://fadi.el-eter.com/are-penny-stocks-safe.html
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