PENNY STOCKS FOR BEGINNERS 📈 Basics Of Investing In Penny Stocks #Best Education Page #Online Earning

so this is probably one of the most

common questions that I've been getting

with me is people are looking for me to

talk about penny stocks so this is

basically going to be a video for

complete beginners who want to learn

about penny stocks so if you're somebody

who is already involved in penny stocks

and you already have learned about it a

lot of this information might be pretty

basic but I am going to go pretty

in-depth with this and kind of cover all

the grounds in penny stocks so you might

get something out of this video but if

you already experienced with penny

stocks this might not be the best video

for you but if you're a complete

beginner and you're looking to learn

about penny stocks this would be in the

video for you so personally I don't

invest in penny stocks and I'm going to

explain to you in this video why it is

that I don't recommend that beginners

invest in penny stocks but for people

who are looking to learn more about it

and kind of decide if it's an investment

you want to get involved with

maybe this will shed some light on that

for you so first of all what is a pesar

there's a couple basic characteristics

of penny stocks the first one is that

they trade outside of the major stock

exchanges so for the most part you don't

see penny stocks unlike the New York

Stock Exchange around the Nasdaq Stock

Exchange the major exchanges there they

have a small market cap and they

generally have a low stock price so I'm

going to talk about this in a second

here but basically most people have the

misconception that a penny stock is a

stock that trades for under a dollar a

share but in fact the SEC defines a

penny stock as any stock that trades

under five dollars a share now you do

sometimes see penny stocks trading on

the major exchanges under five dollars a

share but for the most part you'll see

most of the cheaper penny stocks on

smaller exchanges which I will tell you

about a second here so what are other

names for penny stocks sometimes they're

called OTC which stands for

over-the-counter that has to do with the

training of the stocks they trade

through the OTC bebe which is the OTC

bulletin board so if you ever see that

next to a stock symbol understand that

that is a stock that trades on the

over-the-counter stock Bolton board and

they're also called Pink Sheets because

basically pink sheets are daily

publications compiled by the national

quotation Bureau with a bid and ask

price of over-the-counter stocks and

they are actually printed out on a pink

piece of paper hence the nickname Pink

Sheets and like I said so the SEC

defines a penny stock as any stock that

trades under five dollars a share

most penny stocks like us that don't

trade on a major exchange but some do

because large companies end up trading

in that SEC defined penny stock range of

under five dollars based on market cap

so if a stock is doing this performing

really badly it's possible for that

stock to be trading on a major exchange

but to be trading under five dollars a

share so who actually invests in penny

stocks who are penny stocks for Cyborg

investor's who have a high tolerance for

risk our generally people who are

investing in penny stocks these are a

very risky investment penny stocks have

high volatility high volatility it means

higher risk and anytime that there's

higher risk there's higher potential

reward but one is also a high potential

for reward there's also very high

potential for loss penny stock traders

generally set a stoploss stop-loss order

on their investments so that's basically

something you can set up where you have

it automatically sell that position if

it's full of a certain percentage or a

certain dollar amount so I don't really

know anybody who trade penny stocks and

just leaves them there to let them

freefall generally you're very careful

with them because because the price is

so volatile they could fall very quickly

so you have stop-loss orders in place to

try to kind of mitigate some of that

risk associated with them penny stocks

are appearing due to their explosive

moves so I'm sure you guys have heard of

penny stocks you know going you know

doubling or tripling in a trading day so

that's why people like the idea of penny

stocks is you invest in this in a penny

stock you don't pay a lot of money for

the investment because they're training

at a lower price per share and then

there's the potential supposedly for

that stock to quadruple in value and the

thing is guys that is so uncommon and

what's more common is that you'll invest

penstock and they'll fall in value and

even sometimes - you'll see these

companies end up going bankrupt and you

lose your entire investment based on

genes are unrealistic generally with

listed stocks because they're not as

volatile there's generally less risk

associated with unlisted stocks -

because they're more reputable and

stable companies and there's certain

standards you have to be held to in

order to be on a major exchange which

we'll talk about in a little bit here

well I pretty much have this diagram

here just to explain basically some of

the characteristics of penny stocks so a

penny stock company what would you

expect out of a penny stock company well

they're going to be a growing company

they have limited cash and generally

limited resources as well and they're

often not profitable companies so here's

a couple of things depending on which

exchange is on whether it's traded on

pink sheets or the OTC B V the OTC

over-the-counter bulletin board they may

or may not have to even file with the

SEC so as a result it's incredibly hard

to get credible information on penny

stock companies I'll explain in a second

because one of those two they do have to

have some filings with the SEC but the

other one they don't have to file with

the SEC whatsoever now with a listed

company on a major exchange they have to

file with the SEC so you know you can

get credible information on that company

they're not going to be on a major

exchange you're going to be on the

over-the-counter bulletin board or the

Pink Sheets so as an investment if you

were to invest in penny stocks what

would you expect out of a penny stock

investment first of all they're highly

speculative meaning the investments are

largely based on speculation of future

value they're a very high risk like I

said before you can invest in the penny

stock and lose your entire investment

because the company goes bankrupt and

there's very high volatility with these

stocks and that is due to the fact that

there's very low trading volume and

there's poor liquidity with the stock

the other problem is - and I know I

meant I'm going to mention - somewhere

in here with all my notes that have but

just to throw this out here - a lot of

people don't realize this but what's

good about trading on a trading a stock

on major exchanges there's so many

people buying and selling that stock

there's high liquidity and as a result

it's pretty

easy to sell or buy that stock on

because there are so many people

actively trading that stock now with a

penny stock there's no guarantee that

there's a buyer on the other end when

you're looking to sell that stock so you

can potentially be in a position where

you invest in a penny stock it goes way

up in value

you go great let me sell it and you

can't sell it because there's not a

buyer on the other end because there's

poor liquidity with that stock so that's

something you have to consider as well

before you decide to invest in the penny

stock so if for whatever reason you

absolutely insist on trading a penny

stock my recommendation to you is to at

least trade a listed stock because these

stocks are required to file with the SEC

and they're regulated with the SEC if

you're trading

Pink Sheets stocks there's no regulation

with the SEC required and with the OTC

bulletin board stocks there's minimal

filings with the SEC that are required

so why is it that penny stocks are a

risky investment there's four main

reasons here the first is the lack of

public information so as we just said

here the OTC bulletin board stocks are

required to file minimal information

with the SEC while the pink sheet stocks

are not required to file with the SEC as

a result it is difficult or in some

cases impossible to find credible

information on these companies so if

you're somebody who is investing

long-term in a stock where you're

looking to learn about you know the

company fundamentals

it can be very difficult to find good

information on the stock and you can't

even in some cases guarantee the

information you do find is legitimate in

credible information when you're

treating a listed stock because they are

required to file with the SEC and

they're heavily regulated by the SEC the

information is much more credible when

you're looking at the fundamentals of

the company number two is that there are

no basic standards basically listed

stocks they have to fulfill certain

standards in order to say lists of the

stock exchange otherwise on the major

exchanges otherwise they end up getting

D listed and a listed stock will then be

trading on either an over-the-counter

volton board or through patience so they

have to fulfill certain standards in

order to stay listed now on the other

hand there are no standards to remain on

the OTC bulletin board or

on Pink Sheets so there's no basic

standards for companies to be on there

so there's nothing guaranteeing that

this is a good company to invest in

whereas would be major exchanges there

are standards they have to follow

number three is history so because penny

stock companies are often newly formed

companies there's no history as base

that investment also and in some cases

if there is a history it is one with a

poor track record or if there is no

history on them there's no track record

for that company and the other thing too

is we talked about the risk of companies

going bankrupt is much higher when

you're investing in penny stocks because

many of these companies are approaching

bankruptcy and when a company goes

bankrupt pretty much everybody gets paid

before the investors get paid so you'll

be lucky if you ever see any of your

money that you had invested in that

stock and number four is liquidity so

liquidity is basically the degree to

which an asset or security can be

quickly bought or sold in the market

without affecting the assets price this

is where there's a lot of danger

associated with penny stocks okay first

of all like we said before it may be

very hard to find a buyer when you're

looking to sell your penny stock but

second of all there's a lot of traders

out there who are manipulating the stock

price because of the poor liquidity

meaning that changes you know it's more

people or buying or selling there's more

of an effect on the actual stock price

of a stock with more liquidity so

basically you have people that do what's

called a pump and dump scheme I talked

about this in one of my other videos I

don't remember which one it is but

there's a lot of scams associated penny

stocks um I'm just going to mention this

one that's the most common one but if

you guys are curious look up just penny

stock scams and there's a lot of them

that are explained there and if you guys

want me to do a video just on the scams

and penny stocks let me know and I can

now try to get that out to you guys well

basically the pump and dump scheme is

where a somebody will buy a large amount

of some random penny stock okay and

generally this is people who have an

influence or they have a to speak to so

let's say somebody had a stock market

newsletter that sent around people

emails and they had active readers so

they would buy a large amount of that

penny stock

okay then they would send around a

newsletter saying this is the next hot

penny stock you need to buy as much of

this as you can get your hands on so

then when everybody listens to them and

buys this penny stock the price of the

stock source and then the person who

wrote that newsletter sells for a profit

and then just walks away and soon after

the stock price topples because there's

nothing justifying that stock price

because nothing that they said about

that being that penny stock was actually

true so that's what called the pump and

dump scheme and as far as people I know

who invest in penny stocks I have a

couple of friends of mine who have

invested in them and a couple of them

have had luck so like data invested in

penny stocks and they've seen it

quadruple in value and they've made a

lot of money but the problem is guys is

how is that repeatable because generally

when you're investing in penny stocks

you might as well just close your eyes

and just point and just pick whatever

one your finger lands on because there's

no real way to follow the charts because

the charts are so volatile it's hard to

find credible information so how can you

repeat that in the future that's what I

want to see what that investment is okay

I've made money I want to consistently

make money going forward I don't want it

to be random where it's like hey I was

able to be lucky and pick a good stock I

hope it happens again and so basic is

people I know who have invested in penny

stocks most of them have lost money of

the few I know that have made money they

end up just continuing to buy penny

stocks going forward and they can't

repeat that create a quadruple of price

that they did before on that first pay

stop because it's largely just based on

speculation and luck and I'm not a type

of person who wants to invest based on

luck if I was I would just go to the

casino and you know I don't know a lot

of people will get penny stocks and

investments and especially when I'm

talking to these animals to the ones

that are on the like the OTC bulletin

board and the Pink Sheets I don't see

those as an investment I see this as a

gamble to be honest with you guys the

only people that I know that are making

consistent money on penny stocks are

actually people who short sell pump and

dump schemes the biggest person I know

who does this is Tim Sykes I'm not sure

if you guys have heard of him before he

does a lot of promotion and a lot

promotion tactics are kind of he's kind

of known as like the typical douchebags

market investor because he puts up

pictures of himself driving cars and

holding big stacks of money to promote

himself and is I guess his strategies

are kind of unconditional or the way he

comes across and I've never like watched

any of his videos but I've read a couple

articles about him but basically what

they do and the people he teaches what

they do is they basically watch for what

appears should be a pump and dump scheme

and then they short sell that stock and

they make money from the falling stock

price so that's not a conventional

trading method and it's not a simple

trading method either that's quite

complex so I've never short sold a stock

but it's a little more involved than

just buying a stock low and selling a

high from everybody from everything I've

found i have not seen people who have

consistently made a profit with the

strategy of buying low and selling high

with penny stocks all right so how does

a penny stock actually show up on the

market so this is basically how a penny

stock is born first of all the company

files registration statements or

registration statement with the

Securities and Exchange Commission or

they file an exemption from registration

and then they end up they begin taking

orders from the investors and then at

this point company company can apply to

be listed I major exchange or continue

to trade over-the-counter this is a

process known as an IPO or an initial

public offering of stock the IPO is a

means for the company to raise money to

basically sell involve a portion of

their company in return for capital to

expand or grow their business it is

difficult for small companies to get or

stay listed on a major exchange due to

hefty costs strict regulation and

requirements so that's why you'll often

see stocks that are listed out of

following off and end up trading on a

penny stock exchange for that reason

there it's difficult though to stay

listed and it is all it's also common

for companies to offer additional

secondary market offering after the

initial public offering and the problem

with that is it actually will dilute the

shares of the stock on the other thing

to remember with penny stocks too is

there is after-hours trading so many

penny stocks can be traded after-hours

and maybe the market move

happen after hours making it extremely

risky to leave a stop unattended as you

guys know with lifted stocks there's

market hours and you can treat stocks

during market hours but off hours you

can't trade stocks you can set orders to

sell immediately at the open or buy

immediately at the open of the markets

but you can't actually exchange shares

after market hours but with some penny

stocks you do have that option to trade

shares off market hours the other thing

to do to that poor liquidity even if a

penny stock spikes after hours it can be

difficult to sell it so you could have a

stock go way up

maybe it's trading after hours it's not

pressure goes up you try to sell it and

there's no buyer on the other end

looking to buy that stock and the other

thing to remember with this is the

quotation systems around penny stocks

they're not as good penny stocks are

known to have poor reporting making

accurate quotation difficult to find so

guys that's pretty much the basics of

penny stocks here so if you're like a

beginner investor and I know them I

understand the allure with penny stocks

because you're thinking like okay well

let's say you're trying to invest $1,000

and you see a stock that's trading for

$1 a share that's technically a penny

stock versus a stock that's trading at

$100 a share and you say well I can only

buy 10 shares of that listed stock or I

can buy a thousand shares of this other

stock and it seems like you're getting

more bang for your buck but stock price

has nothing to do with how good a

company is or how good an investment is

and a lot of very shady people are out

there trying to push pay stocks on

people I know when I was doing research

for this video just looking at who had

made videos on penny stocks a lot of

people are out there making videos

making penny stocks looking really like

a good investment for beginners and it's

just unfortunate because they're not a

investment for a beginner penny stocks

are for experienced investors who have a

very high tolerance for risk so as a

beginner getting into stocks it is the

last place I'd recommend you invest your

money if you're looking to get started

in the stock market maybe look at a

dividend stock or just simply invest in

a company

you're really luck that would be like I

guess kind of where I'd recommend

getting started you know pick your

favorite company maybe you really like

apple or any certain company and you

want to do a long-term investment and

learn about you know checking stock

prices and learn about dividends and you

know about quarterly earnings reading

earnings statements and stuff like that

that's the best place to get your feet

wet penny stocks are not where you

should be getting started with investing

but anyways guys that's pretty much all

I got this video if you guys have any

questions about this topic or any other

topics I cover on the channel please

feel free to drop me a comment below and

if you guys are looking to learn more

about investing in stocks not penny

stocks obviously but I do have my guide

on investing in the stock market which I

will link up in the description and

there should be an annotation popping up

here on the screen as well but if you

guys enjoyed this video please drop me a

like and I'll get there subscribing to

be notified of future uploads and I

thank you guys for watching this video

you

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