Hot penny stock is referred to that company stock which has values of less than $5, is in high demand. These are traded quickly and attract large investments in terms of volume. Instances of investments to the level of $10,000 are also not uncommon in hot penny stock trading. It is not surprising that substantial profits are made when price rises by even a few cents of these stocks.
Hot penny stock investment involves plenty of risk in spite of low stock values. It does not necessarily imply that a low priced stock loss or profit of lesser sums. Considerable money could either be gained or lost while trading in hot penny stocks. Penny stock trading usually takes place on OTCBB (over the counter bulletin board) basis and carries high speculation value. Consequently the risk involved in trading in penny stock is considerably high. With limited liquidity and listless trading speculating in such stocks should be perfect and without any room for errors.
Hot penny stocks are somewhat safer since they are offered by companies who are already listed and command a prestigious position in commodities market. These stocks are offered by joint stock companies for some definite purpose. Exigent expenditure costs are raised by issuing hot penny stocks. Often, corporations to share their profit among stakeholders and investors offer hot penny stocks. Penny stocks are also offered when a company has reached its maximum growth level under certain given circumstances and wants restructuring of tax structure.
Normally, penny stocks are traded outside regular commodity market and involve trading of shares of many unlisted companies. Hot penny stocks though traded outside normal securities market do not involve too high a risk as they are offered by established joint stock companies who are already listed with Securities and Exchange Commission.
The primary objective of trading in penny stocks is to make money at short interval of time. As price per share is low, investments have to be made in sufficient volumes to make substantial profit. Caution must be taken to not become too voracious and trade them off fast after gaining a profitable sum. Though investing in hot penny stocks has lesser risk as compared to penny stocks floated by unlisted companies, the element of market risk always exists. Close monitoring of stock prices on regular basis is the key to high profitability while trading in hot penny stock.
The underlining aspect where hot penny stock stands at an advantageous position relative to regular stock is the amount of initial investment. In hot penny stock an investment worth $500 is considered sizeable, which is insignificant if trading is done with regular listed securities. For all practical purposes and to keep risks at minimum an investment of $500 is considered worthwhile and free of great risks.
For hot penny stock there is no definite amount of lower or higher limits of investment. You must be comfortable with the investment you make and not feel pressurized of the investment made. The loss should be manageable and must not affect your savings and other investments. Investments also must never be too high that you need to change your lifestyle.
