Penny stocks are traded in various places. Some of the markets where they trade are good, while others can be a bit volatile if not careful.

SmallCap Market

This is both the safest and best place to find penny stocks. Companies listed here have regimented reporting requirements, and must keep in compliance with these to maintain their listing. This enables investors to have access to the company’s financial results and ongoing reports.

Usually, the shares listed here will be $1.00 and up. If the shares of a company on the NASDAQ SmallCap begins trading for less than $1.00, the exchange usually boots these stocks, forcing them to drop down to the OTC-BB.

Most financial websites and news services cover shares on the NASDAQ SmallCap market, so it enables greater information visibility. As well, the increased visibility will improve trading volume and investor participation. Also, brokers will have no trouble enabling your trades in NASDAQ SmallCap shares, and probably won’t have any additional commissions or rules for trading these issues.

Shares on the NASDAQ usually have four-letter ticker symbols, such as PVAT, IDEV, and DRAX. Trading on this platform is one of the safest as it provides PS traders with:

  • Excellent investor visibility
  • Strict reporting and corporate responsibility standards
  • Easy to buy and sell
  • Easy to get information and data about the company

OTC-BB (Over-The-Counter Bulletin Board)

The OTC Bulletin Board (OTC-BB) is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities. It is owned and operated by the NASDAQ, so is very legitimate.

An OTC-BB equity security generally is any equity that is not listed or traded on NASDAQ or a national securities exchange. In other words, it is a system for creating some regulation and accountability for stocks “without a home.” Some of the advantages of trading on OTC-BB are:

  • It gives traders access to more than 3,600 securities
  • Includes more than 330 participating Market Makers
  • Electronically transmits real-time quote, price, and volume information
  • Displays indications of interest and prior-day trading activity

AMEX

The American Stock Exchange, like the NASDAQ SmallCap, is an excellent platform for penny stock traders. Shares trading here may have less volume than those on the NASDAQ SmallCap, but the companies are subject to reporting requirements and are also followed by print and online news websites, so investors can enjoy the same benefits as that of SmallCap exchange.

Pink Sheets Penny Stocks

The pink sheets are stocks that trade without any reporting requirements or regulation, and have less responsibility to you, the investor. They can be very hard to buy and sell, as the trading activity in them is very low.

The origins of the Pink Sheets goes back to 1904, when the National Quotation Bureau began as a paper-based, inter-dealer quotation service linking competing market makers in OTC securities across the country. Since that time, the Pink Sheets and the Yellow Sheets have been the central resource for trading information in OTC stocks and bonds. There are far fewer listing requirements and regulations are less stringent. Non-existent reporting and corporate responsibility standards often carry disadvantages like:

  • Easy to buy and at times, difficult to sell
  • No information or data about the company, or about the trading activity/prices of the shares

Penny Stocks Straight from Companies

It is possible to buy shares directly from the companies in some cases. The main reason to do this would be to avoid paying a brokerage commission. As well, it may be an easier way to acquire shares in a more obscure company than trading for them Over-The-Counter.

Besides with the Over-The-Counter stocks, one can face a few problems with direct purchasing. There can be no assurances that you are getting a fair valuation based on prevailing market prices, and in most cases the quoted amount can be higher than you would have had to pay if buying on an exchange.

For less traded Over-The-Counter equities, it may not be possible to get appropriate trading prices. OTC issues do not have any system of matching up buy and sell orders, so buying the shares is no different than buying a used car. The seller may be asking far too much, and perhaps far more than the most recent trades. Hence, investors are advised to buy through a reputed broker. Advantages include:

  • No brokerage commission charge
  • Less trading volumes
  • Easy to buy
  • No corporate responsibility requirements

Penny Stocks over the Phone

Although it was more prevalent in the ’70s and ’80s, phone salesmen vouching for a stock may be doing it for commission and may not always be genuine. Under no circumstances should any investor accept an offer to purchase shares in a company that they heard about through an unsolicited phone call, fax, or email!!

The companies are promoted aggressively, and in most cases are nearly non-existent, poorly run, fundamentally vacant shells. It is nearly impossible to resell shares in these equities, whether you have made a profit or a loss. Disadvantages include:

  • Non-existent reporting and corporate responsibility standards
  • Potentially non-existent company
  • Easy to buy and hard to sell
  • No information or data about the company, or about the trading activity/prices of the shares
  • Prices may be arbitrary and baseless
  • You are almost certainly being lied to, or aggressively mis-led

Canadian Markets

The Toronto Stock Exchange (TSX) and Toronto Venture Exchange (TSX-V) both list penny stock shares, some as low as a couple of cents. If your broker provides over the border trade services, these could be a good option to.

These companies are often trading so inexpensively simply because they are smaller in size. With Canadian penny stocks, there are literally thousands of good companies to choose between. Advantages of trading with Canadian Markets include:

  • Huge selection of penny stocks
  • Good reporting requirements and corporate responsibility
  • Good to medium availability to corporate data/information
  • Ease of access to trading and pricing data
  • Easy to buy and sell
  • Good trading volume in most cases

However, the brokerage charges could be more compared to other trading platforms mentioned above.

Always Opt For Top Brokers If You Want to Invest In Penny Stocks

In conclusion, it is always recommended that you do your homework and choose your broker carefully before making any penny stock investments. Penny stocks are very volatile with potential for extraordinary returns, so investing in them requires care and caution. By choosing a right broker you can be assured that your hard earned money is being invested properly.