OTC Stocks are composed primarily of penny stocks, and basically includes the:
• OTC BB,
The initials OTC stand for: Over-The-Counter but these types of stocks are traded like Nasdaq stock - on an electronic dealer network through broker-dealers.
Actually, OTC stocks are traded just like any other stock most of the time if using an online broker, although these are sometimes very thinly traded stocks. . .
Gray Sheets are the exception. More on Gray Sheets later.
The OTC market is filled with developmental companies, many of which are technology stocks.
OTC Trading: Technology Stocks - the Sleeping Giant
Technology stocks starting to rebound big time as the economy recovers from its 5 year depression. This was bound to happen. The world's reliance on technology for survival in the type of lifestyle we expect is not going away.
The need for technology to solve the many crisis in such major areas as the global financial system, energy, environment, global security and defense, health and food is accelerating.
Since 2008 until mid 2014, the recession was holding back the tide of technology stock investing. The investment money was instead going to precious metals and energy and the money market, various bonds, and solid dividend paying stocks as a hedge against the unstable debt ridden fiat money we all presently work for to pay our bills.
The need for technology to solve ever growing crisis situations is in extremely high demand globally. The dearth of investment sources had clobbered technology stocks during the depression.
OTC Trading of Technology Stocks
OTC Trading of technology stocks during the depression was more difficult, but was an excellent time to find diamonds in the rough while they were still hibernating. To find them, you had to do good research using the essential strategies to successfully invest in them as this site shows you.
As the economy heats up, technology penny stocks will continue to offer great potential trading and profits.
The OTC market is not a stock exchange.
All stocks on non-ECN stock exchanges are called listed stocks.
All stocks on the OTC market are called unlisted stocks.
OTC Trading: Listed vs Unlisted
Listed stocks are those stocks traded on a SEC approved non-ECN stock exchange like NASDAQ, NYSE, NYSE MKT (AMEX),
The stocks originating from a stock exchange, like Nasdaq, NYSE, NYSE MKT, are called "listed stocks" to separate them from the OTC stocks.
ECN Stock Exchanges do not possess any stocks that originate from those ECN's. Rather, ECN's (Electronic Communication Networks) trade stocks originating from non-ECN stock exchanges and also OTC stocks.
The type of stocks available to trade on an ECN will depend on the ECN.
Major ECN stock exchanges in the US are:
BATS, Direct Edge, EDGE.
Note that Direct Edge and EDGE are now merged with BATS under the BATS name.
SEE: "Real-Time Quotes - Explained" for more in-depth study on ECN's.
Listed stocks have a high degree of regulation, thus more likely legitimate.
For these reasons, listed stocks are more trusted by stock traders and investors. Consequently listed stocks generally enjoy greater trading volume.
This also means that listed stocks are generally
• less risky,
• less likely to be involved in scams,
• more likely to obtain favorable financing,
• more likely to represent legitimate quality companies that make a profit,
• have better financial positions
• have greater liquidity and volume of trading
than unlisted stocks.
This means that listed stocks are a more trusted resource for investing by professional traders than unlisted stocks.
Listed stock are generally far more carefully followed and researched for trading opportunities by investors .
NOTE: At least one registered market maker manages a stock on the OTC BB and Pink Sheets by law.
OTC Trading: Gray Sheet Stocks
Grey Sheets stocks are local stocks and are not publicly traded unless they acquire approval to trade public shares.
Trading of Grey Sheet pubic shares is not handled by market makers on a dealer-market; rather, they are traded through a participating broker.
Gray sheets are extremely illiquid, difficult to find info on, most are shell companies, and no guarantee you can sell them.
Trading such stocks is a far slower process then for publicly traded companies.
For these reasons and more, Grey Sheets are not short term investment material.
Types of regulation of OTC stocks and how this knowledge benefits you. . .
OTC stocks are not part of any stock exchange
NYSE, NYSE MKT (AMEX) and NASDAQ are SEC approved Stock Exchanges with a review board and special regulation that go beyond SEC guidelines. This insures the quality of such stocks for trading. Investors and traders feel safer investing in such stocks.
OTC stocks lack any stock exchange review board that regulates those stocks. So, this removes a layer of regulation that would otherwise insure a safer investment experience.
OTC BB stocks are under SEC reporting mandates, just like listed stocks.
Pink Sheets are reviewed and categorized by a private company. This private company categorizes these stocks by quality and quantity of information it offers to the public. More on this later.
Pink Sheet companies may voluntarily submit SEC financials and business reports.
Grey Sheets have no regulation beyond the fact that stocks represent a company and also have a ticker symbol.
OTC BB stocks transparency
OTC BB stocks must file timely quarterly and annual reports with the U.S. Securities and Exchange Commission (SEC) just like listed stocks.
This type of regulation, plus other information you can glean from the net, is what makes OTC BB stocks easy to search and find accurate information you need to create successful investment strategies.
OTC trading of BB stocks can be very profitable if you know how it's done. This site shows you how.
Pink Sheets Transparency
Pink sheets stocks may volunteer to file timely reports with the SEC, but do not have to. In fact, as hinted at earlier, Pink sheet stocks are listed in categories of 'invest-ability' by the private company that manages them.
This categorization is based mainly on how much information a Pink Sheet company is willing to submit to a regulatory authority and how timely they do this. More on Pink Sheets in that sub-topic.
OTC Trading of types of unlisted stocks
On future sub-topics of this topic I will provide more information on the OTCBB, Pink Sheets and Grey Sheets.
Stock Screening is easier if you understand:
• how such stocks are traded in a particular sector,
• where to find reliable information on such stocks, and
• what to do with the information once collected.
The Purpose of this site is to show you how to do this among other things necessary to be a successful penny stock trader.
OTC Trading: Understanding OTC stock categorizations for profitable screening
One of the most important methods of doing a primary screening for OTC stocks in the sector you are interested in is to understand the categorization of OTC stocks. Once you understand this, then you can more easily filter out shady or unworthy stocks from the high potential stocks.
For instance. . .
OTC Trading of OTC BB stocks is generally associated with far less risk then Pink Sheets to research and invest in because they are under SEC regulation to provide truthful and timely company, product and financial information.
They must file timely financial and business reports by law to be listed on the OTC BB. And if they do not file a timely report, this is publicly made known by the SEC.
OTC Trading of Pink sheets are riskier because transparency is voluntary. Even so, the Pink Sheets has its own categorization of pink sheet stocks based on their level of transparency - financially mostly. These categorizations in this market are helpful in discerning higher quality Pink Sheets OTC stocks to research and potentially invest in.
These types of stocks, however, are not mandated by the SEC to provide such information; so, such companies, even if they say they provide such reports, may not always provide timely reports, and will face no penalty by the SEC.
OTC trading of Grey sheets has no categorization available beyond being Gray Sheets. I would stay away from them no matter how much hype you hear by marketeers of the vast profits you can potentially make from them. Do not be gullible.
If you can't find accurate company, financial, product and historical information on a stock, then how can you determine its worth?
If you cannot trade such a stock quickly, if at all, how can you limit risks?
Will you take the word of a marketeer, who's sole purpose is to make you give your money to him?
Do you like risk gambling with your money? ... Then OTC trading of Gray Sheets are for you.
Remember, the OTC trading of stocks takes place electronically on a network of computers between market makers, brokers and traders - except for Grey Sheets.
How are unlisted stocks different to trade then listed?
You will trade most OTC stocks virtually the same way as on the NYSE and the NASDAQ. The difference between listed stocks and OTC stocks (unlisted), in general, is that OTC stocks are:
• not regulated by a review board
• less liquid
• more easily influenced by news sources, marketeer involvement, and scams
• not as financially stable
• rarely making a profit
• accumulating far greater debt
• more likely exploration or developmental stocks
• more likely avoided by professional and institutional investors
• more likely to garner high investor potential on highly successful news
• more likely to explode in value by 3% to well over 300% within minutes or hours
• more likely to plummet on market basher attacks on less than stellar news
• highly reliant on non-financial data such as company owned intellectual property, management, history of operation, VIP interested parties, etc., as a means of evaluating the perceived worth of such companies.
OTC Trading the Most Thinly Traded Penny Stocks
The most thinly traded and risky OTC stocks, even on the OTC BB, may require you to create buy orders by phone with your broker rather than electronically via your broker website.
Because that is how reputable brokers attempt to protect their clients - investors like you and me.
OTC Trading - How Orders are filled
Since many OTC stocks are thinly traded, you are more likely not to get a fill on all the shares you desire to buy or sell all at the same time or even the same day.
This is especially true if you are buying or selling a huge number of shares from a stock that is stagnant in trading activity and/or has low market cap.
What it all amounts to is that there are not many sellers or buyers of that stock for reasons you might be able to think of. For instance. . .
• if not enough sellers, then maybe the sellers will only sell on a huge markup on the current value of the shares. If this is the case, that may be a good sign that the stock may trade higher in the future - but don't let that fact alone be your guide because there are other reasons why sellers are not selling.
For instance: Maybe the stock just plummeted recently and those holding the stock don't want to sell at that low price and lose their investment principle. Such traders may feel that the stock will rebound in time.
• If not enough buyers, and the stock is trading lower, then maybe the traders see something wrong with the stock. That might be a bad sign worth further investigation on your part.
For instance: Maybe the stock has not posted new updates for a long while and investors are starting to panic or lose interest.
Maybe some dismal news came out.
Maybe marketeer stock bashers are demoting the stock.
Maybe a financial quarterly report is due soon and investors are on edge.
Only good research can tell you if such a stock is a worthy investment.
OTC Trading and Commissions:
If your buy or sell order gets completely filled all in the same day, then you only pay one commission even if you get many fills on the same order at the price you set as your limit for that day.
If you get more than one fill on your buy or sell order over a period of days on a GTC (good-till-cancelled) order, then you pay a commission for each day that order is being filled.
You will more likely get your order filled the same day if your bid or ask price is well within the trading range, especially on most OTCBB stocks, and if your investment per trade is under $15,000; so, be realistic.
OTC Trading: How much can I safely invest in a stock?
How much you can realistically invest in a penny stock at one time all depends on the market cap and the volume of trading, and the volume of buy vs sell orders taking place in recent history and how much you are prepared to lose if things go bad.
Be aware of the market cap - anything below 10 million is risky. Any trades made should be on exceptional news and only short term.
Any stock under 4 million market cap is a red flag that something is likely wrong with that stock even if you cannot find it right away.
Yellow and Red alerts when trading stocks with a market cap under $15 million
Remember, be very careful about OTC trading of penny stocks with a market cap under $15 million. And I would really do a thorough research on financial data of a penny stock that has a market cap under $10 million.
I also trade stocks with a market cap as low as $4 million, and sometimes far lower. Fundamentals are key in evaluating such stocks. Such trades are very short term, generally. . .
You don't want to be holding shares of a thinly stock that sells for pennies per share and then find out later that their financial situation is critical or their product is worthless or the company is a scam.
If the financial status of such a company is risky and unsure, wait until the next quarterly report comes out and review it before considering an investment.
If you are already invested, then continually consider the financial status of the company, and consider the economy as well. . .
Investors are far more paranoid about OTC trading of high debt stocks in a bad economy when investment money dries up. You can be sure that other investors are thinking and doing the same thing.
Be especially aware that any stock with a market cap of $10 million or less is unlikely (but not impossible) to obtain the financing required to fund a multi-million dollar product development campaign - no matter how super the developmental product may be.
What helps in cases like this are alliances/collaborations with major biotech firms with big pockets, military grants, and philanthropic donations or grants.
OTC trading in small market cap stocks that do not have adequate financing to pursue major product development should be very short term and only after close monitoring and good research shows that such a stock is developing a product on highly prized intellectual property.
The thinking here is that financing will eventually become available from a VIP source.
Your research should show that prestigious organizations, and even the government show interest and even support for the company and its developments.
OTC trading of stocks are generally associated with less trading activity, far less money changing hands in general, less regulation, and more marketeer involvement and scam campaigns then stocks traded on a stock exchange. Well over half of such stocks are involved in scams or are duds.
This is all advantageous for you, as you are finding out, but only if you do your research and know how to research, what to research, and how to use the data once collected. If you do this, then OTC trading can be very profitable.
You have the advantage over all other penny stock traders, because most of them will not study OTC stocks, or invest in them, until good news is already out on them. By then, it's too late.
How can I profit from OTC rocket stocks?
If you use the strategies this site reveals to you, then OTC trading will be very profitable. You will already be invested in a penny stock before it turns into a rocket. You can reasonably double your all your investment money every year on your penny stock investments.
This ends this subtopic called:
When You are ready, please continue on with your journey.