Penny stocks are those that sell for less than $5 per share, although it has many types of definition based on market value. Some of the definitions indicate that these are the ones that are traded on the pink sheets or over the counter (OTC). The basis is that those companies that have lower value and cannot reach the stock market negotiate them.
For beginners, the best thing to do is to find proper information about trading these penny stocks. They will be informed about how to select the best types to invest in and the strategies they can use when trading them. These strategies are useful when selecting the type of brokers they can work with. They need to know that not all brokers and companies are legitimate and they should be careful when selecting them. Getting information about these brokers and the financial information of the companies they want to trade with will help them make the right decisions.
They will also need to educate themselves about the different risks associated with trading this market and the types of scams they will be exposed to and how to avoid them. Although not all brokers are bad and fraudulent, beginners should make sure that they have selected the best ones in terms of the services offered, as well as commissions and other related costs. The most common type of scam that the investor should be aware of is the pump and dump scam and beginners should be careful with this because they will end up with cheap stocks that no one is willing to buy. This information is available in a number of places, including online sites that deal with stocks, as well as other investment literature.