How about "a penny for your stock"? Most investors associate penny stocks as red flags risks that spell "DANGER". What then is penny stock? Penny shares are defined as small companies' shares that normally cost less than $5 per share. Generally, investors are afraid of "burning their hands" with penny stocks investments, as they are low price shares that boost small market's values since these shares lack liquidity.
However, high volatility can equate to huge profits too, if trading strategies are skilfully masterminded. Hence, when an investor holds a penny stock he must be quick witted and prompt in his decision. In penny stock trading, the age old idiom of "time and tide waits for no man" aptly applies. In other words, he must "buy and sell" very quickly. Moreover, penny stocks are much more accessible to investors with limited capital because they are cheap. In fact many newbies start their trading journeys with penny stocks.
After having summarised all the pros of penny stock trading, we can now focus on its weaknesses:
One vital point to note is that not all penny stocks are listed over major stock exchanges. They may be traded over the counter bulletin board (OTC). As such these companies do not have to comply to the strict regulations set by major exchanges. This is hazardous because seasoned trickster can manipulate and falsify the company's statements to lure those innocent investors. Commonly, such an enterprise lacks historical data for potential investors to make wise choices.
It is not easy to locate undervalued shares and examine closely their positive points. One example of good value penny stock to focus on is $Metamaterial Exchangeco Inc (MMAX.CA)$
Basically, trading on penny stocks are not suitable if an investor does not adopt an attitude of trading with great diligence and only risk what he can afford to lose. Otherwise, he can become "penny wise, pound foolish". They are certainly red flags for long term investments.
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$Metamaterial Exchangeco Inc (MMAX.CA)$
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