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The Major Players In The World Of Penny Stock Trading

Jul 4, 2008
New investors most often find the penny stock trading very appealing for two reasons. One is because it is cheap. The price range is between one to three dollars and not exceeding five dollars. This is defined by the Securities and Exchange Commission or the SEC. In actual practice, shares can even go lower than a dollar each. The second magnet for new investors is its high potential for fast profit at a short period of time.

But how does it work? Where does all the money come from and where does it go? In penny stock trading, there are key players that make a dynamic exchange of shares. The common goal is to make money and reinvest. Here are the role players in the business:

- Investor. If you are an investor, you are playing a key role in the stock market trading floor. The investment money comes from you. Of course an investment cannot be an investment if there is no intended profit to make. Some investors would trade on to many shares. This is because if one of your stock investments is losing, you can balance your profitability from another source. You also make decisions of your trading. Why and how?

- Penny Stock Broker - You as the investor cannot make transactions if there are no stock brokers to help you. They can influence the market stocks. They have a high degree of intelligence in the penny stock trading business. For every profit you make, they earn by commission. They also have other client investors to attend to. In some cases, penny stock brokers charge for investment consultations to their clients. But what exactly are they doing with your money?

- Small Cap Companies - There won't be any investment made if there are no entities needing it. In the penny stock trading market, they are call small cap companies. These are companies that can either be newly established, wanting to expand their business resources for business growth, or going bankrupt and hoping to revitalize their financial resources. Whatever the reasons may be, these entities are responsible for the dynamics of your money.

- Stock Exchange - This is the venue where the buying and selling of shares take place. The trading is done every business day. All of the penny stock brokers meet at a huge spacious room they call the trading floor. This is even shown in movies that involve stock exchange scenarios.

- SEC - Of course, to keep the entire procedure in penny stock trading orderly and discipline, the SEC holds authority. They set the regulations and guidelines, the requirements needed for companies to bid their shares, and sometimes initiate the jailing of fraudsters who conduct anomalous business here.
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