The term “penny stock” typically refers to stocks that trade below $5, and are highly speculative. Penny stocks are usually quoted over-the-counter, on the OTCBB, or Pink Sheets. However, penny stocks may also trade on larger exchanges such as the NASDAQ, or foreign securities exchanges.
Penny stocks carry a high degree of risk, and are speculative investments. Penny stock traders are usually looking for large returns with small investments and are willing to take the inherent risks.
Some penny stocks that are traded are new and offer real opportunities. However, novice investors should realize that a large percentage of these companies fail and their stock will lose all of its value.
It is very important to conduct thorough research on any penny stock before investing.
