Penny stocks are generally shares of small companies which are genrally trading below their par value otr face value. Face value is the price at which share was issued. These stock may or may not have potential and thus one must enter in these stocks with diligence as chances of losing capital are very bright. These stocks are generlaly not followed by good stock brokers. In India generally such stocks are kept in Z stock or trade to trade segment.

According to the SEC (Securities and Exchange Commission), a ‘penny stock” refers to “low-priced (below $5), speculative securities of very small companies.” A penny stock is traded over the counter (OTC) through quotation services such as the OTC Bulletin Board or the Pink Sheets.

Thus do not get lured by flse promises of penny trading and becoming a millionaitre overnight because if it was that potential these stocks would not have had been a penny stock and trading below the par value.
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