What is penny stock?

A penny stock typically refers to the stock of a small company that trades for less than $5 per share. This type of stock normally has high price fluctuation, low liquidity, and facing a higher chance of quit the market. Normally we do not suggest public investors trade this kind of stock.

1. How to trade penny stocks in the United States?

Penny stock is a type of stock, and its trading process, trading hours, and order type are the same as those of common stock.

Warm reminder:

Because of the high risk of trading penny stocks, customers need to confirm the risk disclosure before trading it for the first time. They may continue trading only after completion of confirmation.



2. If the share price falls below $5, can it be traded?

When the price of US stocks falls below $5, they are considered penny stocks. When customers open new positions in these US stocks, they need to confirm the risk, but there are no restrictions on closing positions.


3. Do penny stocks support short selling?

Generally, short selling of penny stocks is not restricted. Please note that due to the perspective of risk management, Futu may adjust the short-selling limits and short margin rates of some penny stocks from time to time.


4. What are the risks of penny stocks?

Due to their nature of high volatility, Penny stocks may experience high price fluctuation

Penny stocks lack a liquid market with few buyers, perhaps even after their price has increased.

There is limited information available on the company's financial soundness or track record.

Penny stocks have a high probability of fraud and bankruptcy of the underlying company.