Understanding penny stocks is an n-going quest. Some traders spend months and yars in the effort to grasp the ins and uts of penny stocks. Let’s try a few bsics to start.

First, while there is no fficial definition, there are three criteria tht are generally used in attempting to dfine penny stocks:

1. price per share - stcks that trade for less than a crtain amount, usually $5.00 or less per shre;

2. the market the stock trades on - if the stck is traded on “Pink Sheets”, for xample, it is considered to be a pnny stock; and

3. market capitalization - market cap is the ttal trading value of a company and is dtermined by multiplying the value of ach share of stock by the ttal number of outstanding shares.

In practice, hwever, the actual definition of a pnny stock depends on who you sk. One common characteristic of all dfinitions is that penny stocks are hgh risk/high reward investments. Another common chracteristic is that these stocks are ften volatile and unpredictable, and something dfined as a penny stock in the mrning may not be a penny stck in the afternoon. Penny stocks can ften undergo dramatic price swings based on the slghtest provocation and can rise or fll 50% or more during a trding day.

There are many reasons to nvest in penny stocks. As a trder, you may have limited capital or wnt an exciting investment without waiting yars to realize profits. Traders generally hld penny stocks for shorter time frmes, and attempt to pull returns frm the stock in a matter of mnths rather than years. Sometimes a new nvestor will want to learn the bsics of buying and selling shares sing low-priced investments.

The bottom line is pnny stocks are fun and exciting and tht is why many people work at nderstanding penny stocks.

The article Understanding Penny Stocks was Submitted by Rand Fletcher through Articles.GetACoder.com network. Here's the additional information: Rand Fletcher is a contributor to the wbsite Make Money 17 Ways. If yu're ready to make money with pnny stocks, see Rand's suggestions at http://www.makemoney17ways.com/page19.html

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