Pink Sheets Trading:
Why do I discuss Pink Sheets and Gray Sheet stocks on this site?. . .
Why?
Simply because more investors than ever are becoming victims of scam promotions of such stocks and losing hard earned money for no good reason. Investors are being destroyed for lack of knowledge.
Pink Sheets is part of the OTC market and contain those stocks that trade publicly but, unlike the OTCBB, are not under SEC regulation or any other oversight committee other than the initial filing for inclusion into the Pink Sheets.
Filing of SEC financial or business reports is voluntary.
Stocks must file an application through FINRA to be considered for registration and to begin trading on the Pink Sheets.
FINRA (Financial Industry Regulatory Authority) is the largest independent regulator for all securities firms doing business in the United States.
FINRA's application for Pink Sheets trading is lengthy and difficult and time consuming - more so than registration for the OTCBB or even a stock exchange.
These filing restrictions are a blessing for pink sheet traders but, are not really effective in regulating Pink Sheets or preventing many scams associated with this category of stocks after the initial registration process.
OTC Markets Group, Inc. is a private company not associated with the SEC (Securities and Exchange Commission).
The "Group" lists all those OTC stocks that are not part of the OTCBB.
In addition though, the OTC Markets Group also quotes many OTCBB stocks on its quoting system. However OTCBB stocks are not Pink Sheet stocks.
I am impressed with the way the OTC Markets Group categorizes and displays these types of stocks on its website. The "Groups" efforts are beneficial for Pink Sheets trading, because their neat categorization of these stocks makes screening for high quality stocks far easier. Pink Sheets trading is less riskier and more rewarding thanks to the efforts of the OTC Markets Group and its predecessors.
OTC Markets Group created six categories of Pink Sheets stocks as follows:
1. OTCQB: The best of the these stocks. Such stocks voluntarily register and report to the SEC.
2. OTCQX: These stocks do not report to the SEC but do provide audited financial statements to the public.
Those stocks that do not make it on the OTCQB or OTCQX lists are labeled and listed into the following categories as follows:
3. Current Information: Companies that keep up to date on their company's financials at least every six months.
4. Limited Information: Companies that provide incomplete disclosure on company's financials.
5. No Information: Companies that do not disclose any financial statements or other information about company operations.
6. Caveat Emptor - Buyer Beware: These stocks are most identified as scams with pump and dump promotions and mass emailings, and marketeer advertising campaigns.
The labeling and categorization of stocks by OTC Markets Group, Inc. makes browsing and searching for stocks on its website more efficient, easy, investor friendly. Pink Sheets trading can, therefore, be less risky in that sense.
Pink Sheets Trading:
Specializing in Pink Sheets is a must. . .
If you feel Pink Sheets trading is for you, then you must specialize in this financial market so you know the potential trading risks and understand how these stocks operate, and how to search for them.
The website of the OTC Markets Group, Inc. is a good place to start your search. After starting there, continue your research.
Do not get all hypnotized by stocks displayed on the site with quotes showing a 100% gains. Research that stock and the history of technical indicators for such stocks.
Pink Sheets Trading:
Areas of study or fundamentals to watch for. . .
Most such stocks are very thinly traded. Some are IPO's, or recently added; so, have very little history. Many were once listed stocks, but fell out of grace. Some are bankrupt companies, or companies that have gone through bankruptcy. Others are shell companies with no actual products in development. So you really have to know the companies well.
To be successful at Pink Sheets trading, you must diligently search for those companies that have enough history and fundamental data to base a trade.
Pink Sheets Trading: Do your own research. . .
Don't ever take the word of some 'expert' or stock pick sent by email, newsletter or other source. Be aware that such advertising is associated with a marketing scam probably 98% of the time. Do the research yourself or you end up being a follower. Followers get stuck holding shares at inflated prices.
Do a search on OTC Markets Group, Inc. website. Study their website. OTC Markets Group has a detailed categorized list of all the Pink OTC stocks as described on this page. The top two categories of stocks, OTCQB or OTCQX, are the ones you want to focus on. All other categories do not have enough information to make accurate decisions and strategies.
Pink Sheets - Real Time Quotes
At a small cost, you can get quotes and other information, including message board for every stock on all pink sheet stocks all in streaming real-time. . .
InvestorHub Streaming Real-time Quotes "Small Cap Package" is a cost effective method to do this.
You want to do the same kind of research you would do for any penny stock just as this site is showing you. If your target pink sheet stock does not have in depth information, then pass it by. Don't take unnecessary risks with your hard earned money.
Use the same proven strategies with Penny Stocks as with all other penny stocks and you will succeed.
Pink Sheets Trading: Real-time activity is generally low...
Keep in mind that such stocks are not as actively traded as on the OTCBB. These stocks normally do not trade every second and may take well over 20 minutes before another trade occurs. So real-time quotes do not guarantee active trading on a stock you are watching.
Active Pink Sheets Trading of any given stock is mainly due to marketeer promotions. Unfortunately many naive investors are gullible enough to follow the lead like pigs to the slaughter.
After the promotion, when the marketeers finally dump the stock, trading becomes very illiquid and the share values sink quickly, leaving the investment pig with worthless shares.
Pinks Sheets Trading: Follow the Lead, make money, without being a pig. . .
If you plan to follow the lead and buy some shares before the stock spikes, then sell once it reaches 6% increase in share price or so.
If the promoters say the stock will easily rocket over 100%, then sell at 6% to 10% increase in share prices. Only the fundamentals can help you discern a safe level to sell. That way you can pretty well insure you will earn a quick 6% to 10% and get out well before the stock is dumped by the promoters.
Another safer way to be a follower and still make money off Pink Sheet stocks is. . .
First determine if the stock appears exciting on its own merits... does the idea, the product, the marketing plan, etc appear workable and realistic?
Do such developments appear to offer a significant advantage over the competition?
Does the information state that the company is lining up potential retailers, for a product launch? ... etc.
Does the company appear to have financing in place?
If so, wait for the stock to plunge after the marketeers (the shady stock promoters) dump, and then purchase some shares.
Very likely this stock will be re-promoted by the marketeers within a month, and you will be already invested at the bottom. At this point, a 20% to 200% increase in share values is likely with another marketeer promotion.
Keep in mind though, that the stock may only "appear" to be high quality in the ways I described.
Marketing on pink sheet stocks news letters, or other types of media, can be very misleading. But that does not matter at this point. What matters is that it sounds really good.
Still this is risky, because so many unknown variables will occur once the marketeers (the shady stock promoters) are involved. Don't be greedy like a piggy and you will make a profit off the marketeers scam promotions before they dump.
Pink Sheets Trading: Screen for the best of these stocks, then research and monitor...
If you find a Pink stock that is worth investigating as a potential investment, then use the proven investment strategies on this site. Do NOT invest in any such stock that is presently being promoted by media in any way unless you plan on making that quick 6% profit off a scam promotion, but only if you can get in just as it begins trending up.
Pink Sheets trading: A typical list of pink sheet stocks. . .
Pink Sheets Stocks
• are mostly nano-cap listed stocks.
• are not registered with any exchanges.
• do not usually have much history.
• many are newer stocks - at least those that involve scams.
• are not required to be overseen by the Securities and Exchange Commission (SEC) or any other oversight committee; so, they do not have to report financial statements of any kind! All reporting is voluntary.
• have little regulation beyond the lengthy FINRA application and registration process.
• can be difficult to find reliable information on.
• are far more prone to be victims of marketing gimmicks, or instigated for corruption, scams and fraudulant promotions and activities through email, faxes, news letters, mail, chat and message services, and websites.
• are more difficult to invest in unless your broker is friendly to such stocks - then you likely have to call your broker to make trades on the pinksheet market.
• Broker facilitated Pink Sheets execution can take longer and may have to be done by phone, depending on the broker and your agreement with him.
• can be difficult to buy and sell - because they can become very illiquid.
• are thinly traded.
• are traded at a premium - the broker's cut.
• can be heavily owned by company management.
Obviously Pink Sheets trading can be profitable when you screen and target the better stocks in this category. In general though, such stocks are most associated with scams.
Pink Sheets trading: Risky for most traders. . .
Trading risks associated with these stocks are much higher then for the OTCBB market for all the reasons just listed and discussed.
Pink Sheets Trading:
FINRA Lengthy Application Process for Pink Sheet listed stocks is a big plus for traders. . .
As noted earlier on this page, OTC Markets Group Inc has its own review board in place with rules it follows to list these stocks according to its six categories of quality previously given.
OTC Markets Group encourages all companies in this category to do what is necessary to follow all local and FINRA laws and rules.
As an incentive, OTC Markets Group will promote a compliant company in a more prestigious category on its listings.
When you take into consideration the difficult FINRA registration process and the OTC Markets Group attempts at regulating or encouraging Pink Sheets, you would think that many companies listed on the Pink Sheets may have at least started out fairly genuine and reputable, at least far more so than companies listed on the Grey Sheets or even OTCBB stocks. But in reality, many shady stocks exist on the Pink Sheets, and many more are targets of scams.
If you do find a stock marketeer promotion though, check on the OTC Markets Group, Inc website to see what category of risk the stock is listed. Chances are that the stock is not a voluntary full disclosure stock. Chances are the stock has a market cap under $2 million, lacks adequate history, and thus, may likely be a sham or scam - a worthless shell company being promoted as if it were a super stock.
Pink Sheet Trading: Summary. . .
As noted earlier, all the stocks listed on the OTC Markets Group website are labeled or categorized into one of the six groups previously listed on this page, so that any investor can easily understand and determine which stocks have more complete financial and company data to research.
Once an investor knows about this categorization of Pink Sheet Stocks, then Pink Sheet trading and research can be done more efficiently and with more confidence. Trading risks can be limited by such knowledge and study.
I am an interested bystander of Pink stocks...
I rarely invest in any pink sheet stocks, but I am interested in them and do follow them and include some on my personal hot list of stocks. Some of my pink sheet potentials have sky rocketed in value, but most have stopped trading within two years.
I repeat some of the earlier warnings about pink sheets stocks. Please do not take these warnings lightly. . .
Unless you know the history of the company and management very well and are super impressed, and the stock is not presently being promoted by marketeers, do not invest in that stock.
The major drawbacks of Pink Sheets trading are. . .
• many of them have limited or no financial / management / operation / product information available - except from marketeer promotions!
• investor interest in these stocks is quite limited in comparison to OTCBB stocks so Pink Sheets are far more illiquid.
• The Pink OTC Market, far more so than any other market, is victim of the most vicious stock pic scams. These scams are many!
Pink Sheets Trading: Last minute advice...
If a Pink Sheet stock does provide timely financial data, the results of such data are usually not good.
Do not invest in any Pink Sheet stock that is being promoted or has limited information about its products or product developments, activities, management and financing, debt or has limited history (under 3 years) as a stock.
Despite all the warnings, some really good companies are listed on the pink sheets.
Even so, the majority of the more successful companies listed have closed trading of public shares.
This concludes this lesson on Pink Sheets Trading of the OTC Markets Group, Inc stocks.
The next lesson is Gray Sheets. Please continue on to this next lesson when you are ready: Grey Sheets Trading