Penny Stocks are not listed on stock exchanges like NY Stock exchange because they don’t meet the listing requirements. While buying penny stocks you must know the fact that listed stocks must have required number of stockholders, assets, and should give financial reports regularly.
Penny stocks are traded on the OTCBB or as Pink sheets for customers. Over the counter stocks are traded through OTCBB which is an electronic quotation system, such stocks are not listed on any of national stock exchanges. The only obligation of such stock is the companies have to submit financial report to the SEC. The Pink sheets transactions are not monitored by the SEC. If the company has turnover of less than 10 million dollars and have investors less than five hundred in total, then there is no filing at all. for further details , visit : http://www.campaigndesk.org/consider-factors-choosing-penny-stocks/
These all facts make the penny stock trading the tricky one. For these reasons penny stocks are prone to manipulations. The share price of such stocks normally far under dollar five and they have small market capitalization because company dealing in are itself are of small scale.
Lack of information on penny stocks makes them tricky and it is difficult to find information about the companys financial position and turnover. Due to less public interest and few numbers of investors, penny stock trading volume is normally low. This means that even little purchase and sell can have bigger effect on the share price. The low share cost makes it possible to buy a huge quantity of stock with small amount of money. With lesser share value and limited cash needs, this market usually attracts new traders. Mainly, penny stock trading is considered as game of experienced investors.
Many investors will not get success; some also had to suffer losses. Don’t underestimate the value of research before buying worthy stock else you end up getting burnt.