Definition: The name given to a stock typically trading below $5/share. These stocks typically have low market caps, little liquidity, and are traded on OTC exchanges.
TeenAnalyst Advice: Penny stocks are risky for a number of reasons, including?
1.) Small changes in the stock price affect your return greatly.
2.) These stocks usually have less history for investors to go buy.
3.) These stocks usually have bigger spreads in the bid/ask prices so you don't always buy or sell the stock at the price you want.
4.) A little bit of news can send the stock swinging sharply in one direction.