OTCBB Stock Trading

This is an introductory article on OTCBB stock trading, which is a type of trading where stocks are bought and sold over-the-counter (OTC) and are usually considered unlisted, low priced stocks, often trading on either the OTCBB or the Pink Sheets.

While today's regular stock exchanges trading provide for a large volume of electronic trading via personal computers, the OTCBB stocks, although they can be traded from personal computers also, are very different.

Many stocks that can be found trading on the OTCBB are there for a reason. Some reasons could be: poor financial condition of the company itself; not wanting to meet strict regulatory requirements of the major exchanges therefore having no option but to trade on the OTCBB market; having something to hide from the public and once again not wanting to be regulated and overseen by trading on the major exchanges; not having enough investor interest and therefore a low stock price.

Those are just some examples but in addition, since there are little to no regulatory requirements this leaves open a void for scammers to step in and try and take advantage of people, thinking they can get away with something a bit easier. One such occurrence that can be found is a pump and dump scheme. These occur when a company hires a marketing/pr firm to spread information about the company and attract investor interest to boost share prices. Since there is little to no regulation, many times the news being spread is purely to boost share prices for short term gains only, not long about building term value in the company.

OTCBB Stock Trading

Looking on the positive side of OTCBB stock trading, there are some stocks that can be found that can be bought and sold for a profit, both short term and long term, but extreme caution, exceptional research and practice should be used at all times.

Many people who buy and sell these types of stocks due research by reading any financial reports the company may produce (keeping in mind they are not regulated like major exchange firms are) and even going so far as to do a search for the company headquarters to see if there is an actual office at the location or not (I have seen sometimes when there wasn't!).

Many times a news report that comes out and boosts shares is actually old news that has been previously released. Since many OTCBB traders act quickly and on hype, there leave's little time to do research to locate a previous news report that may have already been released. That doesn't mean you have to act without doing research yourself though.

Just like with any type of trading or investing involving your hard earned cash, there's a lot to learn. In addition to the items pointed out in the article above, here are some other examples of things to be aware of with OTCBB stock trading: much less liquidity, meaning you may be able to get in but getting out is another story; harder to get filled at good prices; harder to get accurate price quotes; many times there is a delay in order execution; many orders cannot be cancelled in time if you change your mind because of the delay in the order process.

Here are some links to other websites with more information on OTCBB stocks and Penny Stocks: OTCBB.com and SEC.gov




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