What are penny stocks but a way to make money in a short period of time? Well, they are also a way to lose money within a short period of time. The penny stock market is not a place for beginners, no matter how enticing the stories are of people doubling, tripling and quadrupling their investments. That being said, with a bit of research and a clear head a person could very well make a few successful investments that result in a tidy profit.

But what are penny stocks going to do to help people make a lot of money? Their very name implies a small investment amount. But investing in penny stocks means something different depending on where you live and where you put your money. For example, in the UK, a penny stock means that it is a stock or share in a small cap company. The actual share price is usually less than one pound, but as long as the company itself has less than 100 million pounds in market capitalization the share price doesn't matter.

In the US, however, there are different answers to that question of what a penny stock actually is. One definition considers all penny stocks to be those that are traded outside of the major exchanges, like NASDAQ or AMEX. The SEC has a slightly different definition, where a penny stock is defined solely by the share price, as long as it is fewer than five dollars. The market capitalization of the company does not matter, nor does where you trade the stock. This means that you can trade your penny stocks on NASDAQ or through a listing service that is not a secure exchange.

Knowing what are penny stocks will help you do research into this part of the stock market and understand more about why these stocks tend to be so volatile. It really all comes down to size, with smaller shares and smaller companies, and the specific definitions will really depend on where you are from and which definition best fits your situation. The definition itself is not so important, but what is important is that you understand the consequences of the size being smaller and how things change as a result. This will help you to be successful when investing in this particular market.

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So what are penny stocks anyway? You might hear talk about investors making a killing in hot penny stocks, or someone else losing their shirt, so to speak. With so much changing in the stock market since the recent crash in 2008 and the resulting recession, people are looking for ways to more wisely invest their money, and some are trying to take advantage of the market being so low; investing now and reaping the rewards in the future when the market rebounds.

But what are penny stocks going to do to help people make a lot of money? Their very name implies a small investment amount. But investing in penny stocks means something different depending on where you live and where you put your money. For example, in the UK, a penny stock means that it is a stock or share in a small cap company. The actual share price is usually less than one pound, but as long as the company itself has less than 100 million pounds in market capitalization the share price doesn't matter.

In the US, however, there are different answers to that question of what a penny stock actually is. One definition considers all penny stocks to be those that are traded outside of the major exchanges, like NASDAQ or AMEX. The SEC has a slightly different definition, where a penny stock is defined solely by the share price, as long as it is fewer than five dollars. The market capitalization of the company does not matter, nor does where you trade the stock. This means that you can trade your penny stocks on NASDAQ or through a listing service that is not a secure exchange.

So finding out what are penny stocks is not as easy as one would think. A list of penny stocks posted in the UK could be very different from one posted in the States, and even within America a penny stock list could vary depending on whether the SEC definition is followed or not. Essentially, the differences between the different definitions come down to how size is measured. It could be due to the market capitalization of the company, whether they are small cap companies, and the amount of the share price. Where you trade a stock can also come into play. The one consistent factor across the board when it comes to penny stock investing, is that more caution is needed since the size of the stocks tend to result in far more volatility than with traditional ones.

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