Each year, the stockmarket creates new millionaires, and penny stocks have for some time been known as one of the highest profit potential investments in the financial markets. The explanation is often because penny stocks are full of sudden jumps and scalping opportunities in price action due to being so low on volume. This implies they’re affected much more on a relative scale than a large cap stock, so you can literally watch one of these double overnite while a larger cap stock might only have increased five or 10 percent under the same circumstances.
So what exactly is a penny stock? A penny stock is a tiny, often just recently developed public company that trades at a low volume and a low price. Because micro cap stocks are based totally on companies that are tiny and often newly public, they are affected more significantly by the markets.
Price goes up based totally on how many people are purchasing and down primarily based on what number of folks are selling. Each purchase or sell order is a price vote that changes the value of the stock collectively. Over plenty of trades, it often averages out into a well-balanced, cleanly laid out and gradual pattern that can be measured slowly over a period of time.
But now imagine each of these price votes were put towards a stock which has very few active traders. An all of a sudden enormous degree of attention being driven to a stock with only a few folk in it would be like suddenly having a couple million new citizens take part in an election! You can see how this would change the course of the election dramatically, just as it would change the value of the penny stock price significantly.
This is why micro cap stocks have such high potential for millionaires to be born. I am sure you are now clear!