Penny stocks - the underground market

Penny stocks are referred to as those stocks that are not operated on any of the major exchanges (AMEX, NASDAQ, NYSE). They are economical, speculative securities from small companies generally traded through an "over the counter" listing service, such as (OTCBB or Pink Sheets) The novice investor may come across additional terms used which are identical with penny stock like,: microcap stocks, nano caps and small caps.

The OTC BB (OTC Bulletin Board) is a regulated quotation service in the U.S.A. owned by the NASD, for stocks that are not listed on any of the major U.S. stock exchanges. These stocks are always less than $5 per share, and usually less than $1.  The lower the share price, the more volatile they are.  

A stock that is 1 cent can often make gains of 100-300% or more in a single day.  The ones with higher share prices trade more like NYSE stocks, slower and more steadily.  However, a gain of 20-50% in a single day is still common for a stock that trades over $1.

Since these companies trade on small volume and don’t typically have millions of dollars of shares traded in a day, when investors start to buy them the price can rise extremely rapidly.  The lower the average trading volume of a stock, the faster it can make gains.

The most important thing is to find the right penny stocks to trade.

Penny stocks picks are exclusively selected investments generally picked by investing experts who recognize penny stocks that seem ready to explode in value. These specially selected stocks are chosen after the companies have been cautiously explored and evaluated.

There are many online stock analysts who put forward recommendations on these stocks. A lot of them have launched newsletters and penny stock alert services to keep their subscribers updated with the most recent news and trading opportunities.

These special newsletters offer penny stock picks and suggestions, as well as instructions and guidance on how to obtain good penny stocks online. For most investors and traders, this sort of information can make penny stock trading your primary source of income.  Many traders earn over $1 million per year.