NEW YORK, October 13 (FinanceEnquiry.com) - Penny stocks are the ones that trade at $5 or less. Due to their low price, they entice many investors especially the new ones. Penny stocks give an incredible upside for gains, and if prices were to drop, the investor would not have huge losses. Rookie investors can exploit the low prices by learning about the market without staking too much of money.

The high potential of rewards makes it lucrative as they tend to make great moves in short term and novices can turn few hundred dollars to thousands by making positions at right times. In recent times, `microcap stocks’ or `penny stocks’ are gaining popularity among various classes of investors and these speculative investments are finding places in big portfolios too. Shady tactics that gave a bad name to penny stocks have become a thing of past. SEC has taken measures to move out frauds related to penny stocks from the market and it is assumed that better quality professional services remains now. Penny stocks remain high-risk investments with low trading volumes, usually companies moving towards bankruptcy.

Smaller companies with limited capital and startups make up the penny stock segments. They are highly speculative investments and it is not uncommon to see them multiplying in short period but if not stayed cautious it might leave you penniless. Which penny stock to buy and when to buy a penny stock is a very unnerving task for an investor and for this reason, we discuss below about some hot penny stocks trading in the market. As on 12 October2011, the top penny stocks trading on NASDAQ were Sirius Satellite Radio Inc (NASDAQ: SIRI) trading at $1.71 with the highest trading volume churning at 58 million, Level 3 Communications Ltd (NASDAQ: LVLT) trading at $1.76 with the second highest volume 30 million and closely followed by YRC Worldwide Inc (NASDAQ: YRCW) trading at $0.054 with volume touching to 27 million. Some over-the-counter Bulletin board (OTCBB) traded hot penny stocks includes, AER Energy Resources Inc. (AERN) trades at $0.068 with the highest volume of 33 million. Penny stocks like Allezoe Medical Holdings Inc. (ALZM) and Neomedia Technology (NEOM) are other OTC traded stocks with high volumes churning around the day.