What are microcap stocks or 0.0001 stocks? If you type either phrase into any search engine you'd find very passionate conversations taking forth in almost any related forum. Typically speaking, a 0.0001 stocks are the "hot opportunity" type stock that trade on the Over-the-Counter Bulletin Board Exchange (or OTCBB for short). If you think about it, they are kind like over the counter medicines in a sense. Easier to get and are supposed to get you the same result as the more expensive brand of medicine. Prosaic I know, but you have to admit that there is a common thread there no matter how far reaching and/or boring it might be to get there. At any rate, these stocks are called the "hot opportunity" stocks because they are inexpensive to get in and the moves in these markets are generally very big moves that can yield a huge profit. However, by the same token, there are huge losses at stake as well. The thing is, it's not about the risk of losing as much as it is about the fact that you could literally watch your money swing either direction pretty dramatically. This is why most investment brokers advise their clients to stay away from the OTCBB and the fact that the OTCBB is not as regulated as the NASDAQ, AMEX, or NYSE exchanges. You really have to be the type of trader that is not moved by seeing his money go down and up and maybe almost disappear at times. If you can do that you could very well reap the well known and well talked about extravagant profits to be had in trading the 0.0001.
In a word, leverage is what makes the penny stocks trading at 0.0001 so attractive. You literally double your money with one tick of the market in the right direction. This part is not rocket science, if you get in at 0.0001 and the stock moves to 0.0002, you have just made a 100% increase. What trader can walk away from that? Really. Well when you consider some of the "cons" so to speak you may understand why most investment brokers say stay away. One of the few factors to seriously consider when trading an OTCBB stock is how liquid the market is of the particular stock that you're watching or thinking of investing in. It can be a night are to get filled on limit orders with OTCBB stocks-honestly, it can be extremely difficult get filled with a straight-up market orders. Anytime you have difficulty getting filled, especially if your order is set at the prevailing market price (or not too far from it), that indicates that the stock you're trading is slightly illiquid. This will make it a lot harder (and take longer) than a stock with hundreds of millions of shares being traded daily (i.e., strong average daily volume). Another thing to consider is that you really don't know whether or not the stock is on the verge of going away - so to speak. It's tough to say this without sounding like a naysayer, but this is just the reality of the situation. One of the reasons why OTCBB stocks are considered high-risk is because everyone knows that the companies backing the stocks are not always legitimate, or strong enough to be considered a long term viable company just yet. So, you better go ahead and accept the fact that the very 0.0001 stock you're excited about could go away just as quickly or quicker than as it came. With that said be sure that the money you're using to trade these types of stocks is purely investment income and not money taken from another part of the household in hopes of making some quick money in the OTCBB.
Looking for which 0.0001 stocks to trade? Do a Google search for "otcbb stock screener" or something close to that and you'll get a good list of active, inactive, losers and gainers from almost every source imaginable so do your homework and happy trading!