In the USA, a penny stock is nothing more than common shares of stock in a particular company. They usually trade for less than five dollars a share and are traded over the counter through quotation services such as the OTC Bulletin Board or the Pink Sheets. These stocks are said to be "thinly traded," share volumes traded daily can be in the hundreds of millions for a sub-penny stock. Legitimate information on penny stock companies can be challenging to find.

Many investors are lured to the appeal of a penny stock due to the low price. I went to school at Florida State University and got a finance degree. But you don't need a degree to figure out if you buy low and sell high that you will make money. That is the mystique or allure about them. There is not only a perceived potential for rapid growth, there is a huge opportunity for growth. However, severe loss can occur and penny stocks can lose all of their value in the long term.

So this begs the question, are penny stock worth the risk long term? The answer to that depends on each individual investor. I personally can not answer that for you. Everyone has a different propensity for risk tolerance. With that said because the price of each share is so low. It greatly reduces your risk. Sudden changes in demand or supply of these stocks can lead to volatility in the stock price up or down.

The volatility in the penny stock market are remarkable. This is where huge gains can occur. If you are confident enough to trade in the market, then you can time when to get in and out of a stock. Timing is everything with them because they can have huge fluctuations on price. A lack of liquidity can also make them extremely difficult to sell from one day to the next. So patience is a virtue when it comes to investing in them.

In short, a penny stock is common share of stock in a company. They are traded every day over the counter through a quotation service. They are very attractive because of their low price. Investing in them is a personal preference. You can stand to gain a lot if you know how to navigate the market.