One of the more risky arenas of investing is the area of penny stock trading. Penny stocks, also recognized as micro cap stocks, small cap stocks or nano stocks, are shares with little market capitalization and a small value per share.

Some specify penny stocks as simply just micro cap stocks. Micro cap stocks really take a more particular definition. If a company’s market capitalization is under 250 million dollars, then its stock will be viewed a micro cap stock.

Yet penny stocks specifically are more ordinarily associated with one of two definitions. One is that the share is traded for 5 bucks or less per share. The second definition is simply that the share is traded via OTC (Over-the-Counter) quotation services, such as Pink Sheets or the OTC Bulletin Board.

Note that all these variables establish a stock more volatile. The Internet is stuffed with fake ballyhoo regarding penny stocks, but the truth is that it’s a really unstable and risky market in which to invest. Just as stocks may increase in value rapidly, they may drop into oblivion just as quickly.

A key quality of a winning penny stock investor will be that he or she will begin trading penny stocks through the help of a quality online penny stock broker. She or he will avoid penny stock message boards and learn where to buy penny stocks with patience and caution.

And to make affairs all the more challenging, it can often be very hard to explore and validate real data on companies named on the OTC quotation services. Oft times, when you perform quick searches online, you’ll discover artificial data spread to artificially hype the stock and exploit newbie investors.

Therefore if you choose to invest in penny stocks, be prepared to be really distrustful and guarded about your data sources. And deal carefully, really cautiously.