Penny Stocks: Trading in the Cent area.There are classic goods that cost only a few cents: a pack of gum, the bread rolls from the baker, matches, screws from the hardware store. The fact that you only have to pay a few cents for some stocks is likely to surprise most investors.
But in fact there are stocks that have only a very low market value and can therefore be purchased cheaply. This is called Penny Stocks. Investors can count on these stocks to recover again.
Best penny stock broker-What are Penny Stocks?
The term penny stocks is taken from the US stock market model. There he refers to shares (stocks), which have a market value of less than 1 US dollar, so move in the penny range. Accordingly, equities in the euro area are called penny stocks, which are worth less than 1 euro.
Many stock exchanges have adopted stricter rules in recent years to ensure the quality of equities. For example, many exchanges have gradually removed penny stocks from the Prime Standard, the regulated exchange segment. Either completely, then these shares are no longer tradable (delisting). Or they are only moved into the unregulated free market of a stock exchange, where they can continue to be traded. In this case we speak of downlisting.
Best penny stock broker-Volatile Penny Stocks: Between record profit and total loss
One reason for the decision of some stock exchanges is that there is an increased risk associated with penny stocks. As a result of the low market value of the share, even tiny price changes by a few cents have a major impact on invested capital. If, for example, a stock that was bought for 50 cents only drops by 5 cents, that means a price drop of 10 percent. Conversely, this also means, of course, that a price increase of 5 cents will result in a 10 percent gain.
The low market value ultimately means that the volatility, ie the fluctuation range, of a share is very high. This is reinforced by the low trading volume of the penny stocks. Speculators can easily bring large price jumps but also price losses, because they can achieve their return goals with little resources.
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