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Penny stocks are traded on over-the-counter markets through the use of electronic quotation systems called "pink sheets." Penny stocks are higher risk inexpensive stocks that trade for less than $5.In addition to the high risk/high rewards factor, there is something else for traders to consider. Getting your hands on relevant information about the company's operation is one of the most important things traders can do. In the United States, both the SEC and FINRA have specific rules to define and regulate the sale of penny stocks.In the current market, penny stocks are gaining popularity and traders of all ages and skill levels are purchasing penny stocks. When trading prudently, one could make huge profits by trading fundamentally strong penny stocks.
Be aware that a very low-priced stock may be more susceptible to overvaluation being really worth not pennies per share that it is trading for, but less because, like a lottery ticket, some people are willing to pay considerably more than the mathematical expected value for a remote chance of making a great deal of money. Don’t be greedy. Judge the time to sell correctly. There are many investors who end up with a loss, even though they had seen a gain of up to 300 percent on their penny stocks. Making a profit is all about selling at the right time. So, if you see a reasonable gain it’s time to sell. Otherwise you might lose the money you invested in the first place!