Definition of Penny Stocks



Penny stocks are stocks that are traded below $5 per share. The companies that have shares of such low prices have an intention of raising capital from a large number of small investors that can afford to buy small stocks. The penny stocks are highly volatile as they are mostly growing companies that can reflect high fluctuations in stock prices.

 


It is therefore highly recommended to take precautions before entering or exiting from a position. The prices can double or decline sharply in moments so there are chances investors can realize capital gains and even lose their whole investment in one transaction. 


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