What Are Penny Shares?

In this article we will try to give you a brief overview on what are penny shares and why you should know about them.

Penny shares are technically any stock which trades from under $5 a share. They are also called micro cap stocks and are very attractive to the everyday person because you do not need a lot of money in order to start trading.

Normally, penny stocks are traded off the major market in over the counter services. When you think about what are penny shares, you will probably recall stories of fortunes made overnight or people losing big on scams. Both of these scenarios can be true. It is really possible to make a lot of money on penny stocks on the same principal as the major markets: buy low, sell high. However, a different of just one cent on several thousand shares of penny stock creates a huge change.

Because of this, scammers can artificially inflate stock prices by drawing attention to the company and causing increase of shares bought. After the hype, the shares fall down to their real value and the investors lose. Luckily, the FSA has cracked down on most of this behaviour. However, it is important that you fully understand what penny shares are and how they are traded before you enter a venture.

We are hoping that the question "what are penny shares" is not longer bothering you too much.