Penny stocks are a low-priced stock that requires low market capitalization. Penny stocks are traded outside major market exchanges. With their volume and price, penny stocks are generally highly speculative and are considered as high risk since the companies involved lack liquidity, has limited following, and has large bid-ask spreads. Penny stocks are traded over OTCBB or pink sheets. However, there is no strict definition for penny stocks as there are stock from major companies that sell at very low prices.

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