Some Differences Between Penny Stocks and Regular Ones

 Penny stocks vs regular or blue chip stocks

Penny stocks and regular stocks are usually traded differently due to the level of risk associated with penny stocks. 

Penny stocks are traded Over-The-Counter (OTC) or on Pink Sheets because most of them aren't eligigle to trade on the New York Stock Exchange (NYSE) market. 

Nonetheless, Penny stocks are known to have the ability to make traders lots of money in very little period of time. 

At the same time, penny stocks are known to be very risky.

What's a penny stock?

The name "Penny stock" may be confusing because they don't necessarily have to cost a penny in order to be a penny stock.

A penny stock is any stock that's selling at $5 a share or less. To take it further, there are even some of them that are categorized as sub-penny stocks because they cost less than a penny per share. 

Why do some people prefer to trade penny stocks?

Although there are so many cons associated with penny stocks, one cannot ignore the pros.

You don't need to have a large account to trade penny stocks as they're cheap. It makes total sense because the cheaper is a stock the more shares you can afford. 

With penny stocks, one can make money as the price is increasing or as it's going down. 

If you want to make money as the price is going up, it's called "Trading long;" on the other hand, you can "Trade short" to make money as the stock's price is decreasing. 

With that being said, you can make money with penny stock whichever way you choose to trade. 

Why do some others prefer to trade regular stocks?

It's no secret that trading regular stocks are safer than penny stocks; however, it may take longer to start seing any profits.

Making profits fast is the most attractive reason why traders buy penny stocks. Yet, if you're looking for safety while you're investing your money you should not pick penny stocks. 

Blue chips or regular stocks are well-known, they're well-vetted which makes it harder for scammers. 

What are some cons of penny stocks? 

The scariest one is the fact that you can be scammed if you didn't know about the risk. 

Given that penny stocks are less regulated, scammers take the opportunity to deceive people by lying to them and making profits as a result.  

The most used scam in penny stock trading is called pump-and-dump. 

They will hype up a penny stock they already have shares from to encourage so many people to buy in, by telling them they'll make so much in return while there's no truth behind that.

Once they have the stock bought by so many traders and the price significantly increases, the scammers would sell to take their profit. 

Which usually results in a loss for most of those who bought and didn't know it was a scam.

What are some cons of blue chip stocks?

The best way to trade regular stock is to have a good amount of money on hand, if you don't have enough money it'll make no sense because you won't be able to buy as many shares as possible to make profits. 

Regular stocks usually take longer to increase in price which requires investors to buy shares and wait for the right time to sell. 

Penny stocks or blue chip stocks, which one to pick?

Picking the right one to invest in would depend on your knowledge and the size of your bank account. 

You cannot start trading without any research, it's even more difficult for penny stocks.

If you can't afford to buy regular stocks, it'll be a good idea to learn about the market very well before you start investing in penny stocks. 

With penny stocks, things can change very fast in a short span of time.

Your possession can eighter go up or down in seconds. 

Meaning you'll have to know how to set up transactions in order to sell at the right time. 

Conclusion 

Deciding whether to Pick penny stocks or regular stocks is something most investors usually have to deal with. 

It usually boils down to whether you can afford to invest in regular stocks or not. 

But some people prefer the most risky route which also comes with the fastest pace to make profits, referring to penny stocks. 

At the end of the day, you'll be the one making your own decision. 

Always remember that research is the first part of investing. 

Good luck trading and don't forget to share this post on your social media pages to help your friends and family as well.