Many investors and traders will be so naive as to believe that penny stocks are very similar to the underlying stocks are traded on the big boards like New York, Chicago and Tokyo exchange of shares, and Nasdaq. Unfortunately, the opposite is true.
Penny stocks are one of the most risky, if not the most risky investments in the market today. Even trading in futures and commodities market crisis is far safer than the allocation of funds, where one penny stocks in many cases. So, what makes us say that these statements against penny stocks on the risk of alienating the companies, traders and other professionals who depend on the said stock for their lives?
Limited in many cases
Well, there are many good reasons, of course, for such negative statements about MicroCAP shares. Let's start with the fact that he is definitely more difficult to provide reliable, credible and relevant information about the many public companies. This is because the company listed in particular in Pink Sheets, are not subject to stringent reporting requirements imposed by the Securities and Exchange Commission, as well as the stock exchanges themselves.
Therefore, investors may be less quantitative and qualitative information on which to conduct a technical and fundamental analysis. Decisions taken in respect of OTC stocks on the basis of incomplete information can lead to complete Wipeout investment capital.
Due to the lack of reporting requirements of public companies listed in the OTCBB and Pink Sheets are also not required to comply with minimum standards. These standards may relate to the minimum amount of assets and the minimum number of shareholders. Now, contrast this with the minimum requirements established by the Securities and Exchange Commission.
And there are understandable concerns on the limited liquidity in penny stocks. Keep in mind that the shares trade MicroCAP much smaller quantities than larger companies on the stock exchanges. Thus, any abrupt changes in supply and demand can send the price per share or failure as a result of soaring or to be big losses or large profits, depending on which side of the fence a cross-border in the transaction.
Indeed, if the analogy to be used, the New York Stock Exchange and Nasdaq Cadillac is a Lexus while OTCBB is a Hyundai and Pink Sheets in dilapidated cars sold by greasy salesmen. Of course, you can find gems in the Pink Sheets but it is rare for this.
Unlimited Promises
But traders and investors should not so easily dismiss the penny stocks. There are unlimited promises of the resources that only the savviest pro learn to appreciate fully, while others laugh at him.
Penny stocks great learning tool to know how to play the market, how to take capital losses and how to strategize. He also can not deny that some penny stocks on the rise, and it's a savvy trader to catch them, and therefore profit from them in the future.
The trick is to get as much as possible about the company, industry and the economy as a whole. Research is always your best friend in exchange trading and investing and so it is, too, with penny stocks.
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