Small Cap Stocks, Profitable But Risky

Small cap stocksare popular for their “high risk, high reward,”, however it might be quite difficult for a new investor to know which stock is best for him. As the penny stocks has very low prices, so their standing in the market usually is not considered by market capitalization or the way in which it is listed.These are the most speculative stocks. However if you pick right stock at right time, the investment can be much profitable for you. Normally high returns are connected with certain cases like when a newsletter gets published usually in one of the chat rooms or any other place generally this makes the stock go up in price and results a lot of profits in the short run.

The penny stocks are traded in the OTCBB and the Pinksheet exchanges. These are not traded in the conventional markets like NYSE, NASDAQ, etc. OTCBB and Pinksheet stocks are mostly of newly initiated companies developing a product and once they are established they will move to one of the major markets. When searching for a hot penny stock to trade you should look for positive single day movers with higher than average volume. Make a list of 10-20 socks you find best and then start looking at what the company does.

High Risk involved in small cap stocks

Penny stocks investment involved a higher risk element as compared to a conventional stock. These stocks can be mush profitable but on the other side of the coin risk element is also higher.Their prices fluctuate on a very short period of time.

When the prices of a conventional/regulated stockplunge, normally the reason behind the price decrease might that the company need more funds, so when the share price decrease, more people can buy the stock, and company can be able to get a huge amount of share capital to invest in different projects. . After the stock has acquire the required funds, there is much chances go back up in price, a penny stock however once it starts going in a downtrend that there isn't any newsletter publish on it the stock loses its value altogether.

The successful trader keepsrisk element into consideration, so for being a successful trader never buy a penny stock without doing proper research of the company.