Can Penny Stocks Outperform The Market This Month?
What are penny stocks? The basic definition is simply any stock trading below $5 per share. Some traders assume that penny stocks are only ones trading on the OTC or “Over The Counter”. But the fact of the matter is that these stocks aren’t limited to exchange. We’re just focusing on the price. With this in mind, let’s go over some of the groundwork here.
Just because something is “lower in price” it doesn’t mean it’s worth it to buy. Sure you can buy 1 share of Apple for around $385. But you can also buy 385 shares of a penny stock trading at $1. If that share of Apple jumped by $1, your percentage gain wouldn’t reflect anything meaningful. But if your position in that $1 stock jumped by $1, you just doubled your money.
Anyone in this scenario would be happy with this win. But also consider this, if Apple went down by a buck, it isn’t noticeable. Then again if that $1 stock simply dropped by $0.50, you just lost half of your position value. So it’s important to keep all of the risk and reward scenarios in mind.
