In the United States of America, a penny stocks, also known as a micro cap equity, refers to a share in a company which trades for less than $5.00.

This post has been edited by steve123: 27.7.2010, 7:26

Penny stocks work just like any other stock except that there are some differences you should be aware of. The definition of a penny stock varies depending on who you ask. Some consider any stock trading under $5 to be a penny stock. Others consider any stock trading under $1 a penny stock. These stocks are often traded off of the major exchanges and are bought/sold as Pink Sheets or on the Bulletin Boards. There are large risks associated with speculation on penny stocks. These stocks can be easily manipulated by large investors including hedge funds. The bid-ask spread can be substantial and serve as a significant barrier to making profits. Also, the lack of liquidity can limit your ability to trade in and out of your investment and cause sudden price fluctuations.

Ability to select good stocks: Hot penny stocks picks are the ones which are rapidly rising in terms of prices in the market at any given time. These shares are highly volatile in nature. This simply means that the base price for these shares can quickly go either up or down depending upon the market trends. You need to know which are the best penny picks at that particular time and you need to be able to weed out the losers.

The way to profit with these hot penny stocks is to buy low in the beginning and sell high when the shares are on the rise. Here are some tips to help you find profitable penny stock picks: