So You Would Like To Earn Extra Money Trading Penny Stocks

By Cheryl Garth


If you are new to investing you may be thinking about the benefits of penny stocks. It does not cost a lot of money to invest, as the shares are relatively cheap (hence the term "penny stock"). However, there are a lot of things to consider before you begin. Here are some helpful ideas to remember that can get you headed in the right direction.

The newbie who wants to know how to trade penny stocks effectively must look at all the possible risks. These securities are not hard to manipulate, due to the lack of regulations and cheap prices. The slightest bit of bad or good news can have a huge effect on prices and it does not take much money, so anyone can create a stir.

If you spend your hard earned money on cheap stock investing you do not have a lot of protection. Dependable securities from major corporations are traded on big time stock exchanges, which are subject to a great deal of regulation. Most penny stock picks are made from information obtained from the Over-the-Counter Bulletin Board (OTCBB) or Pink Sheets.

Pink Sheets is released by the National Quotation Bureau. The publication gets its name from the pink paper that it was published on originally. This company provides information on OTC companies. An over-the-counter stock is one that is not listed in the big exchanges. Pink Sheets offers a lot of OTC info but their listings are not the only ones. Their stocks are considered high risk because companies do not have to file information with the SEC or Security Exchange Commission.

Pink Sheets and the Over-the-Counter Bulletin Board are not the same thing. The OTCBB has stricter rules than its competition. For instance a company that lists with them must file a report with the SEC. While NASDAQ operates the OTCBB, Pink Sheets is a privately run entity. You can go to the OTCBB site and research stock and companies. Yet, when it is time to buy or sell, it must be done through a broker.

It is always best to research any penny stock investing opportunity completely before you buy. You can go to the SEC website to check out a company. You also may check out a company's ratings with the OTC Markets website. This service rates companies according to how much information they provide investors.

When you research companies and find nothing, you should avoid investing in them. This venture is risky enough without adding more to it. Look for companies that release regular financial statements and take the time to study them well. If you want additional info, you may wish to check out one of many stock research sites that charge small fees.

You cannot buy or sell OTC stock on your own, as you must use a brokerage. Whether you choose a discount or full service broker is up to you. Remember to research well before buying. This lessens the risk on your investment and maximizes your earning potential. Penny stocks are a good way to make money, but they are a risky venture.




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