Why do Penny Stocks Fail?

The penny stocks are amongst the most popular form of stocks for investors in stock trading. A lot of people these days invest in stocks based on recommendations or the word on the market without fully understanding what that investment means. It is important that you must have the basic knowledge on the stocks that you want to invest in. So if you are planning to buy penny stocks and are wondering where to buy penny stocks it then first you must understand what exactly are penny stocks?

Penny stocks and where to buy them?

Broadly speaking the penny stocks are micro capital stocks which involves a small level of investment per stock. A penny stock is essentially any stock that costs less than $5 of money. While this is not exactly the standard definition, however more or less the penny stocks are the ones that can be bought at a relatively smaller price. However the risk of losing money in penny stocks is comparatively higher than other stocks. This is because the penny stocks are considered as illiquid. However the trader who has good information about penny stocks also has a higher chance of making good return on their investment.

The penny stocks are generally very volatile and their prices keep going up and down throughout the day. So before you think of investing in the penny stocks it is important for you to understand the market risks. There are 2 things an investor or a trader must do before investing in the penny stocks. To begin with one must set aside a certain starting capital for trading. This capital should be beyond and bigger the funds required to survive the markets. It is always important to have that leverage when you are trading in the stock market.

The stockbrokers are one of the most important pieces of conducting business in stock market especially if you are a beginner. The stockbrokers are aware of market operations, the risk each of the investment carries with it, the logistical details, market movements and forecasts, analysis of different stocks as well as safe stocks to invest in. As a beginner you would need to rely on the expertise of these stockbrokers who are experienced and have a good knowledge of the market behaviour.

So it is important that you must select a stockbroker who is reputable and has a good history of transactions with its clients. Trust is an important factor in stock investing and once you choose to work with a stockbroker you would need to trust their expertise and knowledge with your capital.

Where to buy penny stocks? Well the answer to that is the two most common places of the market which is over the counter market (OTC)  and bulletin board. The quotations that you are offered at OTC are known as pink sheets which include a list of companies that offer stocks for trade every day. The stockbroker will be able help you with the logistics involved in the purchase of the penny stocks.