Understanding Penny Stocks
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Understanding Penny Stocks and How to Make Millions from Them

When we were kids, we always wanted to learn the tactics to get rich. But with time and when we grew older, we became investor. In fact, you stumbled upon several concepts to trade penny stocks. This is why you are here. In order to begin, let’s find out what are the strategies to implement in penny stocks trading to become millionaire.

What Are Penny Stocks?

According to Layman’s terms, penny stocks are actually pure stocks whose value is below $5 per share. They are basically traded on OTC (Over the Counter) and out of NASDAQ and New York Stock Exchange and various major stock exchanges.

The Securities and Exchange Commission (SEC) of the United States defined penny stocks as the speculative, affordable security provided by small companies, despite capitalization of the market. One can trade penny stocks at OTC listing solutions like Pink Sheets or OTCBB or on NASDAQ or NYSE or any securitized stock exchange. Penny stocks are also known as microcap stock, nano caps and small caps. According to SEC, the status of penny stock can be analyzed by price of shares, not by listing service or capitalization of market.

Making Millions from Penny Stocks

A lot of fledging companies begin from here as ‘penny stock’ companies. In order to enhance their business by raising funds and capital, a newly established company provides common shares of penny stocks to the individuals in the business. Since several new companies are subject to see failure, the initial offerings are valued less than $1 for each share.  For instance, you bought 1 million stock shares at just $0.0001 per share. If the value of stock rises up by $1 per share, the value of your 1 million stock shares will be $1 million.

Investing in Penny Stocks

In order to invest some money, you will need an online trading account, like Charles Schwab, Etrade or Scottrade, or a stock broker. You will have to pay a minimum deposit to these online traders and you will be charged with a little amount of commission whenever you wish to buy or sell stocks. After making an account and depositing some amount of money, you will have to choose the stock to trade. If you want some ideas on stock trading, just Google the phrases “hot penny stocks” or “penny stocks” and get several tips online.

After selecting the stock to invest in, you’re done!

You will be asked for symbol or stock name on the online trading system. Then decide the number of shares to own.

Warnings

Initially, it’s tempting to buy penny stocks and see how they work. Then, you can choose the stock which can be more beneficial to you. But one thing you should note down is that investing in stocks is like trying your fortune in a casino. So, don’t take chance in the game unless you have affordability to lose. Investing in stock can be addictive. So, it is better to invest in a certain limit.

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