A penny stock is a very cheap, and often very risky stock. Under $10/ really starts pushing the categorization of penny stock. Under $5 is definitely a penny stock. They are often have the potential for extreme and have higher odds of losing all value and being Many new traders often become attracted to penny stocks because they are so cheap and their volatility can offer a chance at large returns. Trading penny stocks is often viewed as gambling and should only be done so with caution.