Can otc stocks make money

The experts at RagingBull are here to help. Day trading penny stocks has skyrocketed in popularity in recent years due to the low barrier to entry and the ability to turn small sums into large gains. Savvy investors who have learned how to make money with penny stocks have the potential to make can otc stocks make money profits, but the vast majority of penny stock investors will lose their shirts. Image via Flickr by mikecohen The OTC markets come into play when you consider where the penny stock is traded. The OTC Bulletin Board, an electronic trading service operated by the Financial Industry Regulatory Authority, requires all companies to meet the minimum standards of keeping up-to-date financial statements. Penny stocks listed on publications like the Pink Sheets may not have met these requirements, giving you less information to base your trading decisions on and carrying a greater risk. Plenty of factors could lead to a downturn in share price, even for the shares of a company that is still sound, reputable, and meeting the standards of the exchange. If a stock drops below the point where its capitalization or price per share is too low to meet these standards, the market has the option to delist the stock. If this happens, the stock moves to the OTC market. If penny stock trading sounds like the right choice for you, check out the Ultimate Penny Stock Playbook from the market gurus at Raging Bull. As we mentioned, trading penny stocks is risky. Many of these companies are fly-by-night and highly volatile, which puts traders in a position to lose big.

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. The OTC market is filled with developmental companies, many of which are technology stocks. 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 until mid , 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 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. 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 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. 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.

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Penny stocks come with high risks and the potential for above-average returns. However, investing in these products is highly speculative and investing in them requires care and caution. Due to their inherent risks, few brokerages even offer penny stocks to their clients. Penny stock companies are often shares of companies headed for bankruptcy, small or new companies with little or no following, or business who are highly over-leveraged. Penny stocks can be defined in many different ways. Penny stock scammers deceive by luring inexperienced investors into investing in cheap and worthless stock and taking their money. Be careful not to get caught up in one of these common penny stock scams. Below, are examples of other common penny stock scams you should avoid. This fraud happens all the time. Promoters drum up interest in a scarcely known or unknown stock. Inexperienced investors buy up the shares, pumping the price. Once the stock has reached a certain inflated price, the bad guys sell or dump, the stock at a huge profit. In turn, investors are left high and dry. These pump-and-dump schemes are often distributed through free penny stock newsletters, where the publisher is paid to list these unpromising and hyped-up stocks. If you get one of these newsletters, read the fine print on its website. You may notice that the companies or promoters are paying the author of the newsletter to feature them. This is the opposite of the pump-and-dump. Scammers use short-sell to make a profit. Shorting works when the investor borrows shares and immediately sells them in the open market at a high price, hoping the company stock falls so he can later scoop up sold shares at a lower price. He then returns these shares to the lender and nets a profit. Penny stock scammers short-sell a stock and make sure the stock falls by spreading false and damaging rumors about the company. Investors hold a losing stock, while short-sellers make money through their short-selling trick. Sometimes a private company merges itself with a public company , so it can become publicly traded without the hassle and expense of going through more traditional methods. This makes it easy for the private company to falsify its earnings and inflate its stock prices. Gold, diamonds, and oil have always been alluring. One of the most famous mining scams was Bre-X, in the mids, when founder David Walsh falsely claimed his company found a massive gold mine in Burma. When the company collapsed, most investors lost everything.

First Up: What are Penny Stocks?

Penny stocks are by definition » worth less » than conventional stocksbut they are not necessarily «worthless. Penny stocks are legal, but they are often manipulated. Penny stocks get their name because of their low share price. A low share price can mean several things: Maybe it’s a new company that’s just starting out; maybe it’s an established company that’s fallen on hard times; or maybe it’s not a real company at all!

The problem with penny stocks is that it’s often hard to tell which of these situations is true. Investing in a stock means that you’re buying a share of that company’s total value. For that reason, it’s easier although still not «easy» by any means for investors to predict whether a company’s value is on the rise or in decline. Companies are often traded on the OTC markets because they can’t meet the strict SEC financial reporting requirements of a larger stock exchange.

What that means for investors is that it’s much harder to know the true financial health of a company being traded as a penny stock. Sometimes it’s even hard to figure out what business the company is in! James Royal, an investment writer with Bankrate, worries that new investors are attracted to penny stocks for all the wrong reasons.

They see a stock listed for pennies a share and think, «If this stock goes up just one dollar and I own tons of shares, I’d make a fortune! Royal says that penny stocks are cheap for a reason. Their market value is so low because investors as a whole have determined that there’s little hope of these companies becoming viable, profitable businesses.

That’s not to say that all penny stock companies are doomed to failure. A few might be on the verge of a major turnaround. But to figure that out, smart investors have to do two things: ignore the noise and do their homework.

First, ignore the noise. The penny stock market is rife with snake oil salesmen promoting the next hot stock tip. There are innumerable online investment newsletters and blogs purporting to pick penny stocks that are about to strike gold. Investors should steer clear of amateur stock analysts. Some are on the company’s payroll, hired to hype the company and raise the stock price.

Others are participating in illegal «pump and dump» schemes, in which shareholders make false claims to inflate a company’s share price and then immediately sell off all their shares when the stock spikes. For accurate information about a company’s current and potential earnings, you’ll need to go to the source. Since few penny stock companies file financial reports with the SEC you can search for SEC filingsyou must call up the companies directly and ask for copies of any and all financial statements.

Again, says Royal, not all financial reports are created equal. That’s a huge red flag. Interpreting those financial statements and analyzing the company’s position in the larger market is hard work. That’s one of the biggest reasons while Royal and most other financial writers strongly discourage new investors from messing around with penny stocks. Without reliable advice from experienced and neutral can otc stocks make money analysts, you’re largely on your. If you’re dead set on giving penny stocks a try, follow these tips from Brian O’Connell at The Balance:.

January 17, Penny stocks are cheap but are they a good deal? Avoid penny stocks priced less than 50 cents a share Target stocks with high trading volume, at leastshares per trading session Watch and wait — if you’re interested in a stock, track how it performs for a week before buying it.

Look for warning signs like high volatility. Once you buy a penny stock, don’t hesitate to sell quickly if the price jumps up. Your good fortune likely won’t last long, so cash in before the price drops. Financial regulators don’t want new investors to fall victim to penny stock scams.

In addition to arresting and fining perpetrators «pump and dump» schemes, they provide helpful tips for recognizing when a stock is too good to be true.

How Stocks and the Stock Market Work.

All rights reserved. It has since been updated and republished. The definition of penny stocks is entirely subjective. What I think constitutes a risky penny stock, you might feel is a robust, thriving enterprise. Others are more liberal in their interpretation of what constitutes a penny stock. Treat penny stocks just as you would any other otcc traded investment, and your chances for success increase exponentially. This is especially true when it comes to penny stocks, many of which are still in the early stages of development. Therefore, the ability to exit quicker justifies the higher risk many in this arena are willing to accept to generate atocks future gains. It really comes down to your ability to handle uncertainty. Stick to ot you maek and understand. How many penny stocks should you own? What I do know is that you want to be in at least three or four sectors of the economy that generally are healthy and growing. As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities. Premium Services Newsletters. Sign. About Us Our Analysts. Compare Brokers. Source: Shutterstock.