Making Dollars With Pennies How The Small Investor Can Beat The Wizards On Wall Street

By Author: Jeremy Miller
Total Articles: 23
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Penny Stock trading is an explosive part of the stock market, and one where many savvy investors are learning that there is money to be made in. You hear a lot about Penny Stocks but you don't know the whole story behind it. The term Penny stock describes not only the price of the stock, but the worth of the company the stock represents. Financially, it may be on the bottom of the totem pole, but don't let that position fool you. Just because a stock is bought and traded for pennies on the dollar, doesn't mean that there isn't some serious money to be made.

Penny stocks are the stocks of companies that have a total market value of less than 1 billion dollars. A company's market cap, or market capitalization, can be a measure of that market value and is used in determining the price per share. More often than not though, the relatively low market cap that penny stocks have is due to a low price per share [PPS for short] Some investors see these types of companies as high risk because they are relatively untested in the business world. Be that as it may, a Penny Stock by nature is low risk because of the low initial investment. ...
... Penny Stocks are typically bought and traded for less than $5.00 per share. So, since it is a small market capitalization, Penny Stocks can also be called Small Caps

One variation of a Penny Stock is called a Sub Penny Stock, and trade for as low as one tenth of a penny. These stocks represent companies with market caps of less than 250 million dollars. Companies with a market cap of 50 million dollars represent stocks referred to as micro caps. These terms are used loosely though as some of these sub stocks are traded in the dollar range .This is why Penny Stocks are attractive to the new trader, because although trading stocks is an inherently risky business, the low initial investment also represents a low loss should the stock not perform well.

Another key to understanding what a Penny Stock is, is realizing that it's not that different then it's bigger brother, the Blue Chip Stock. If you understand how to trade on the big markets like NASDAQ, then it's not a stretch to understand how Penny Stocks operate on the smaller markets. Penny Stocks essentially represent small companies. But don't make the mistake of confusing a small company with unstable one that represents a bad stock purchase. If everyone thought that way, then the small companies wouldn't get traded, thus raising their worth. They would either stay small or fold altogether. And for some people, this is the key to understanding Penny Stocks, understanding the big picture that the Penny Stocks are in.

So now that you understand what Penny Stocks are, you can start making sense out of all the tips and advice that you're going to come across as you start trading. And you'll soon find that the informed investor is the one who makes money trading stocks.

Arnold Roth is the author of this article about penny stocks and penny stock tips and appeals to penny stock investors worldwide.