Forum Replies Created
- January 6, 2016 at 7:48 pm#362Anonymous
5 industries. Noticing your energy bills going up every year? So does the utilities sector. Sector includes electric, gas or water utilities, companies that operate as independent producers and/or distributors of power.
- January 7, 2016 at 12:13 pm#380Anonymous
To achieve truly high returns at stock investing, an investor should start their search for hot stocks with Industry Sectors. No matter how bad a company’s financials may be, no matter how overvalued a stock is, if a company does business in a hot Industry Sector, the stock will usually move up with the industry.
Just recently we saw the price of gold and oil rising. Naturally, all the companies involved in those areas shot up. Many stocks were going up 300% or more within months. These are the stocks you want to be in.
- January 7, 2016 at 12:17 pm#381Anonymous
The top online brokers usually offer the better customer service than those of its competitors. Providing fast, reliable support to all their clients will be the secret to maintaining a successful online brokerage and retaining their client base. The trading industry is extremely competitive and most online brokers offer software platforms for fast internet access to perform buying and selling transactions.
To differentiate top online brokers from others can be found in their excellent customer support and service. If something happens to the platform, traders and investors need to know they can depend on their online brokers to perform the transactions for them through the telephone or provide a quick resolution to the platform issue.
Before you begin using an online broker you should review their website and other information to discover the type of customer service they provide. See if they have any guarantees on telephone availability and support so you can continue trading no matter what the circumstance. Top online brokers understand the importance of traders and investors have fast access to the exchanges and market in order to execute their orders and trades.
Do some investigation to make sure your online broker has telephone access and whether there is an actual person at the end of the telephone or whether there is a recording. If you have to be on hold when you call your online broker then you will miss out on your buying and selling of stock and options. This could mean financial disaster for experience traders who earn their living through buying and selling of stock.
Identifying top online brokers can be difficult but one of the key components of finding that top broker is locating the one that has excellent customer service and support through the internet and through a telephone call. A broker that does not put their clients on hold for any reason would definitely be considered a top online broker.
- January 7, 2016 at 12:17 pm#382Anonymous
Cool one right
- January 7, 2016 at 12:24 pm#383Anonymous
You should ignore analysts on TV, the radio, the newspaper and all other TALKING HEADS when it comes to investing!
What stocks do they talk about? – The same old group, every day of every year – Why? Because they don’t know any better, they are sheep like the general public, repeating what every economic textbook says and every other economist tells them to say. Everyday, the same companies are highlighted on the evening news –
They aren’t going anywhere. Some of the stocks that make the headlines every night were leaders of the market 20 years ago. New cycles bring new leaders; this has been proven year in and year out. So many of these TALKING HEADS shout out about “buy and hold” but what are they really holding? They hold old high-flyers that were superstars but have now become fallen stars that sit 20%, 50% or even 90% off of their all-time highs (some may have given you a small return – 10% or less over the past 5 years – WOW – BIG DEAL!). Yes, maybe over 15 or 20 years, you will get your money back – but what is the point? Many of these “so-called” investors tell you how they own XYZ stock and it has returned them 65% BUT they leave out the key factor that it has taken 16 years to get to that point.
One of the strongest and most promising stocks of the early 1900’s (1920 decade) was RCA – this stock was one that people claimed you put in your portfolio and hold it till near death – it will NEVER fall and if it does, hold on because it will come back. Well, let’s take a look: RCA soared over 1100% during the 1920’s and crashed with the rest of the market in the early 1930’s. It went from a low 0f $8.70 to a high of $106 to a crash level of $3.00. Some said to hold, some said buy on every dip. – Guess what, it didn’t climb back to pre-crash levels until 1963! 30 years to break even for some. Maybe that stock in your portfolio is the RCA of yesterday; history always repeats itself because human nature is always the same!
Stocks are worthy to be held over long periods of time, this is a proven fact but don’t EVER hold a stock when it is flashing SELL signals left and right (especially if everyone on TV is telling you to buy now on the dip, “it is a bargain”). These talking heads were saying this about every stock on their computer screen in 2000 and 2001 – “buy the dip”. The only dip was the guy on TV and all of the suckers watching him/her. I don’t mean to offend anyone but you need to take control of your investing life, you need to learn why stocks go up, why they go down and that NO STOCK is immune to a bear market like the one we just had.
Leaders of the market now, won’t be leaders in the future – on some rare occasions, a stock here or there will defy everything and grow decade after decade, but even these stocks end their amazing rise at some point. Same is true for old leaders, they won’t lead the markets of today – they become too large and their growth slows, preventing them from being excellent growth stocks and giving you excellent returns. Now – I never said you couldn’t own a stock like this, many people are satisfied with these companies, they “feel secure”, that is fine; everyone has different goals.
Let the market tell you what is going up or down. Watch “sister stocks”, I talk about them in our education section of the website. What do I mean by sister stocks? They are stocks that are in the same industry. When an industry is strong, most of the stocks in this group will rise, hand in hand. (I say most – not all, laggards always stay behind). Fundamentals will be strong for most stocks in the group and technicals will guide you along the trip – think of technicals as a road map.
Once fundamentals have been established, check the charts, if several stocks from a particular group are breaking out of bases, this is a strong sign that something great is about to happen in this group. The more positive the overall market the better the group will perform (bear markets tend to hold down just about everyone). Why buy a stock that has great fundamentals in a weak group? If all other stocks in that group are acting weak, this may be telling you that the “one” bright spot in this group will eventually come back to the pack, so don’t chance it. Investing is about lowering your risk! Don’t take a risk on a stock that looks good but the industry is hurting.
Buy the leader of a group where several stocks are showing strength. Never buy the cheap stock that is lagging in performance, this is a sure way of losing money – buy the best of the group – the one with the best fundamentals (accelerating earnings, ROE, sales, etc.) and technicals (basing pattern, breakouts on huge volume, relative strength, etc…). What may look high to the general public; usually turns out to be low to the smart professional investor. I am not talking about the “talking heads” on TV – the smart investors work for institutions – they move the market! When they buy, everyone knows because volume jumps to extreme levels or levels not seen in prior months or years. The everyday guy doesn’t have this power – ONLY institutions have this power – learn to understand this power, here lies the smart money.
Finally, as I grind this educational information into your subconscious mind, ignore the “Talking Heads” and learn to listen to the market. Price and volume will always give you the best advice.
- January 7, 2016 at 12:25 pm#384Anonymous
- January 7, 2016 at 12:26 pm#385Anonymous
In the land of the most volatile stocks in the world, Penny stocks, stock promoters, pump and dumps, stock scams are a few of the key words that most people don’t know about when it comes to the penny stock market. Instead they talk about penny stock investing and investing in penny stocks. Investing in these type of stocks is a fools game. The reason for this is because most people do not realize that the OTC Markets (OTCBB and Pinksheets exchanges) list some of the worlds worst companies. Some of these companies are straight up scams like the ones from the movie Boiler Room which was modeled after the true story of Jordan Belfort who was called The Wolf Of Wall Street. This guy was involved in trading pump and dumps in the 1990’s and made $200 million dollars in the stock market. He later went to jail and lost everything, but the same scamsters and con artists that were involved in the penny stock market during Jordan Belforts reign, are still involved today on a different level. Never the less it is possible to earn a profit in this market legally today if you know about advanced technical analysis and chart reading and have a technical trading system for timing the market. You must learn who the key players behind the scenes are and how you can trade on the same side as these people or institutions such as hedge funds, market makers, and stock promoters.
The only way to make money in these stocks, unless you get incredibly lucky just like winning the lottery or winning $25k on a scratch ticket, is to learn to trade penny stocks. When I say trading what I mean is buying the type of stocks and then selling them with in a few hours or a couple days at most. The reason that this is so important is because the liquidity in the penny stock market is very low in general. If you hold a penny stock for too long, especially a position larger than a few hundred or a thousands dollars, you will have a hard time selling the penny stock when you want to. The reason for this is because the average volume in most penny stocks is less than $25k total per day. That means that if you want to sell $5000 worth of a penny stock your order would be selling 25% of the daily volume. Market makers that make a market in penny stocks will see your order and lower the best bid in order to screw you and take some of your money. They won’t execute your trade because they do not have to unlike in listed NASDAQ or NYSE stocks where the market makers have an obligation to market participants.
Starting in 2004 I started to learn how to trade penny stocks. At first I tried investing in penny stocks and soon realized how pointless this was. Then I tried buying stocks that I read about in penny stock newsletters and lost a crap load of money. Later I tried paying so called stock guru’s like Timothy Sykes and Investorslive.com for stock alerts. I found that there’s no way to make money off of others stock trades and stock alert services because you you can not get in at the same price as the guru. I lost thousands of dollars trying to follow these people and eventually realized there’s only one way to make money in the market.
To make money your have to either come up with your own penny stock trading strategy or purchase an eBook or a stock trading guide that has a statistical edge. Most people won’t give this sort of thing out since when you have it you can make a lot of money. The thing is strategies come in all shapes and sizes. Some strategies make a lot of money but require you to sit at the computer from (9:30 a.m. – 4:00 p.m. Monday to Friday) This is called day trading. Other trading strategies allow you to look at the market just around the open from 9:30-10:30 and some strategies allow you to analyze and place your trades only while the market is closed (swing trading)
Trading successfully requires not only have a profitable trading method, but the method must also suit your personality. If it does not you will not stick to the trade signals and the system will be useless. After hundreds of hours of trial and error I finally found that my personality was suited for day trading and short one day overnight swing trades. When I tried to hold longer I just got anxious and lost money or sold to early. I back tested tons of technical indicators that matched my time frame and finally found a group of indicators that when combined gave me profitable trading signals. I don’t sit at the computer all day. I don’t trade hundreds of times a month like a scalper (another style of short term day trading). Instead I take several high probability trades a month with a position size of 3000-50000 shares of stocks in the $.20 – 3.00 price range range. On average I usually earn $5000-10000 a month in the penny stock market Some months more and some a bit less but month after month the trading patterns and trade setups I stumbled upon, allow me to earn big money and trade for a living without having to work for the man.
- January 7, 2016 at 12:28 pm#386Anonymous
Stock funds are the most popular of all mutual funds with investors. This is where most average investors make their biggest profits or take their largest losses. Since mutual funds are long-term investments rather than short-term trading vehicles, finding the best stock fund to buy and hold is important to folks looking for long term growth.
The best stock fund is a consistent performer, rather than last year’s top performance fund based on total return. Last year’s top performer is likely a fund that took excessive risks and/or specialized in a volatile stock sector. Rarely does such a fund have a repeat performance.
The average investor needs a stock fund that tracks the stock market consistently, and rarely if ever underperforms the market in general. The cost of buying and holding the ideal or best stock fund should be low, since sales charges and high yearly expenses eat away at your profits and magnify losses.
Does a mutual fund exist that meets the criterion of our last paragraph? You bet it does, and it’s called a NO-LOAD S&P 500 INDEX FUND. If you invest in just one stock fund, I suggest that you pick one of these.
These funds simply track the S&P 500 Index. Hence, when you own shares in one of these index funds you are invested in 500 major U.S. stocks. These funds are designed to mirror the performance of the stock market.
How do professional investors measure stock market performance in general? They follow the S&P 500 Index. If this index is up 15% for the year, for example, then the stock market is up 15%.
Now let’s talk about the cost of buying and holding stock funds (also called EQUITY funds). Many equity funds have a sales charge (called a LOAD) of 5% or more. For example, if you invest $10,000 in a front-end load stock fund, $500 goes to pay for sales charges. Many folks buy these funds from investment representatives simply because they do not know how to invest on their own.
If you want to invest in an S&P 500 Index fund, you don’t need the help of an investment professional. Instead, call a major NO-LOAD fund company and invest for a total cost of ZERO. No-load means no sales charges.
All mutual funds deduct yearly expenses from your investment account, but some charge much more than others. For example, you could pay 2% a year just to hold an equity fund if you don’t know how to invest. On the other hand, the total yearly expenses for an S&P 500 Index fund of the no-load variety can amount to as little as ¼ of 1%.
If you want to participate in the stock market and save on the cost of investing look no further than the stock fund that consistently keeps up with the market… a no-load S&P 500 Index fund.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
- January 7, 2016 at 12:30 pm#387Anonymous
How To Use The Plethora of Market Tools To Find Good Stock Investment Opportunities.
So you’ve decided you want to invest in the stock market but where do you begin? After setting up your online trading account you take one look at the thousands and thousands of possible financial instruments and if you are like most people, shut down the computer and turn on the Television. The sheer volume of choices can be intimidating and even after you finish that 6 week course on “Online Trading In The New Age” you feel nearly as lost as when you began. Except of course, at least after the course you do understand the differences between a bond, fund and security. The problem is that there are still thousands and thousands of stocks to choose from. What do you do to find those perfect stocks to invest in?
The plethora of choices may seem like an insurmountable mountain of choices and you may feel the need to pick up the phone to call your broker or that friend that talks stocks all the time. In fact narrowing your choices is probably easier today than it has ever been. There are virtually an unlimited number of free financial tools on the web to assist in refining the choices to find investments you are comfortable with. Once you become familiar with using these tools you will no doubt be able to select your potential investments with confidence.
To begin with you first need to decide what type of investment approach you plan on using. Some common classifications are High Risk versus Low Risk, Long Term versus Short Term or Fundamental versus Technical, etc. However, these are guidelines not rules and ultimately you make the decisions so use the criterion that suits you best. Regardless of which style or combination of styles you choose there are tools that can narrow your search for the right stocks.
For the purpose of simplicity in this article we will focus on traditional stock purchases rather than short selling, options or other investment vehicles. Our starting point should be one of the oldest adages in the market. You have no doubt heard this phrase more times than you care to consider: “Buy Low and Sell High!” The funny thing is that the vast majority of people who invest in the market do exactly the opposite, why? The most likely reason is because most people make their purchase based on advice in television programs or on the net or from friends well after the stock is already oversold or very near its peak.
If you want to buy low then look for stocks trading below their normal price levels. There are a number of tools to help you find stocks in this category. An obvious one is the most actives category. A number of sites offer free stock screening services that will filter the stocks that lost the most value usually by dollar or by percentage for the day. These stocks may have lost price value because of internal reasons or because of external factors. In either case you have a starting point, a list of stocks that are now low. From this list you have to determine which ones will continue to drop and which ones will turn back up and regain value.
Another sorting function is the new 52 highs and lows. A number of systems provide regularly updated lists of the new stocks on any particular exchange which have reached their highest high or lowest low over the past 52 weeks. In other words the new 52 low stocks are at their lowest point in the past year. That should sound like a bargain to you because it often is. Like any other declining stock you need to research news and other factors to ascertain why the stock is down. In many cases however you will find that market pressures are the biggest single factor and the stock will often rebound for a rally. The list of new 52 highs and lows changes constantly during each trading day so check the 52 lists often for new buying opportunities.
News often reveals the future direction of a stock as most investor realize however many investors do not assess the ramifications of general market news on a particular stock. Rather than seek out new press releases on companies to evaluate for a buy try monitoring the news of general economic factors which have a bearing on particular industries or sectors. A number of websites offer free news feeds as well as searchable news. It is easier to today to obtain specialized news data than it has ever been.
- January 7, 2016 at 12:31 pm#388Anonymous
“Recession!” It seems to be the single most popular word on the mind of Americans. News outlets love it. Retailers hate it. The general public — they fear it. And the rich? Well they manage it. And you can too if you know how. Here’s three tips that can help offset your recession fears, preserve your investments and in some cases actually make you some money!
1. Insure your stock.
Did you know you can insure your stock? Sadly most American’s do not know this very valuable piece of information. Of course you can’t just go out and buy stock insurance from Progressive or AllState, but it is not much more difficult than that.
Insurance for your stocks comes in the form of “stock options”. Until recently options (for short) were reserved for a special group of investors who had special connections. But in 1973 Chicago Board of Trade launched a new financial exchange they called Chicago Board Options Exchange. While the name itself may not mean a lot to you what it allows you to do could mean the difference in saving your retirement account, or watching it dwindle away to nothing.
At the core what options allow is for a trader to insure, or “hedge”, their position against catastrophic loss. Maybe you’ve heard of a hedge fund. These highly specialized funds specialize in trading these particular investment vehicles. But investment hedges are not reserved for only the sophisticated investor, everyday individual people like yourself can invest in them as well.
If you have some money in the stock market and would like to protect it call your broker and tell him you would like to talk about some “protective put options” to insure you against loss. If he says he doesn’t know what you’re talking about ask for a different broker. If they tell you “you don’t want to do that” — ask your broker how much money he made for you in the last three months. If they tell you “here’s how you do it” — now you can protect your portfolio against a major turn in the market
2. Rent your stock
Many Americans rent an extra house or two every year and benefit from the extra income. But did you know you can “rent” your stock as well? Just like you can use stock options to insure your portfolio, you can also use options to make money on a portfolio that is going nowhere.
After a major downward move in the stock market like we saw during 2008 an immediate rebound is not likely. More often what we see is a sideways market. Simply put the market goes “no where”. However, just because you are not losing money in the market it does not mean you are making money. One way you can make some money is by renting your stock out with call options.
What this type of option allows you to do is to create some income from your stock without selling the stock. A lot of investors like to use this strategy to offset losses and to dollar-cost-average down their position. If the market never recovers they are able to recoup their investments. Or better, when the market does recover, they are literally able to catapult their profits to new levels. This is a sure fire strategy to beat the great recession and protect your financial future.
- January 7, 2016 at 12:37 pm#389Anonymous
In past articles I have touched upon how to play a penny stock or micro cap stock near its bottom. You will come across a lot of stocks at or near their bottoms when trading penny stocks, here are some tips for timing your purchase correctly.
Once you have found a stock you like, take a look at its 52-week high and its 52-week low. This will give you the stock’s trading range for the year. When a stock is trading near its 52-week low it has a better chance of moving upward in the trading range. When at a 52-week high, some traders may feel its to risky to purchase and will wait until there is a retrace in price. This is a general rule for the majority of penny stocks that trade within a range. There are some obvious exceptions, such as great news causing a penny stock to continually make new 52-week highs.
When a stock you like is near or at its 52-week low, you must investigate why. Search for any S-8’s, SB-2’s, or an increase in the amount of operating shares. These filings are dilution, the company will have added shares to the market causing an increase in supply and a price drop. If these filings are not present and there is no reason for the stock to have dropped this low, then it may be a good time to invest.
You should have a good reason why you like the stock before purchasing. Some major things to keep an eye on are stocks in very strong markets. Currently gold and oil stocks are strong, therefore finding undervalued gold and oil penny stocks is a good idea. Another of my favorites is finding a penny stock with an innovative product, these types of products can garner national media attention and often will draw the interest of other big companies in that field.
Ideally, you want to find a company that has increasing revenues and a lot of valuable assets. These types of companies are hard to find and you must investigate thoroughly. Often you must assume they will generate revenues in the future. Look at the amount of shares the insiders are holding: is there a small float with a large amount of insider ownership? This would be a sign that the insiders think that their shares will be very valuable in the future. At times you will also find that institutions are holding a percentage of shares, which would also be a good sign.
Using a stock screener you will be able to generate lists of stocks with institutional holders, insider buying, small floats, and strong revenues. After you generate these lists, separate them by their fields, such as technology, oil, or gold. Find the companies that interest you most in the strongest of fields and begin to read the filings. You will be able to dismiss some companies almost immediately. Keep narrowing down your search until you have a handful of companies into which you are willing to invest your hard earned money.
- January 7, 2016 at 12:40 pm#390Anonymous
Becoming a penny stock trader is an interesting investment decision. The gains or losses can be spectacular, but overall the gains historically outperform traditional stocks by almost a 10:1 margin.
Many people have become millionaires after becoming penny stock trader. At the end of this article you’ll find out how I started, and how you can too. Yes, you can too. You’ll learn how.
Because of the huge potential gains does that mean everyone should be a penny stock trader, or that your portfolio should be made up of nothing but micro cap stocks? No.
Does the volatility mean you should avoid these stocks altogether? No, not at all. Penny trading can be very profitable, and there’s a smart way to get started to mitigate risks and choose stocks with high potential.
The best solution is to learn about micro cap stocks and how to trade them. Then, make a portion of your investment portfolio dedicated to micro cap stocks; roughly 10% – 20%. You’ll be tempted to do more, but you only need a few good micro cap stocks to make a lot of money.
If micro cap stocks can produce great gains as well as losses, how do people become millionaires as a penny stock trader? Well, you probably won’t like my answer, but here it is… the answer is finding the right stocks, and knowing when to take a position in those stocks.
Ok, sounds too easy. How do you do that, you ask? I’ll get to that in a second. But first realize that these micro cap stocks are typically young emerging companies in emerging markets. The potential gains can be enormous because these stocks start-off literally at pennies a share, and then climb to dollars a share, producing gains of 200%, 300%, 400% and more.
Microsoft, Walmart, Dell, Southwest Airlines, and many others started off as micro cap stocks, making millionaires out of the early penny stock traders in these companies.
But getting enormous gains assume a financially solid and growing company with great prospects in their market. Which leads me to the secret of being a winning penny stock trader… knowing how to find the right stocks (solid companies poised for growth).
The reason why people “make” millions as a penny stock trader is because they learned how to research financially sound stocks and when to buy and sell them, including “how” to buy and sell them to mitigate losses, and maximize gains… and I’m talking BIG gains.
The reason why most people “lose” money is because their approach is too cavalier, with little research. Instead, they pick stocks about as well as they do all their other stock and mutual fund investments; they pluck stocks from air, based on what sounds good, or someone’s advice, often with very little research. They choose shortcuts and hope for the best.
Wouldn’t you rather “know” you have a winner, rather than hope? I don’t know about you, but I hate losing money. I like to know my money is invested wisely.
Becoming a highly successful penny stock trader means doing just a little bit of research, knowing exactly what to look for, and then knowing when to buy and sell. It’s easy once you know how.
There is an incredible Penny Stock Investment Guide that teaches how to become a winning penny stock trader in just one evening, using the same techniques as the pros, and it’s free!
I found you can use the investment guide on “any” stock purchase, not just micro cap stocks. It’s helped me tremendously. Now I know a good investment when I see it. I can even spot hidden gems before everyone else.
- January 7, 2016 at 12:42 pm#391Anonymous
Many investors are starting to take a second look at penny or micro-cap stocks. With the economy coming out of recession, many analysts and investors are paying some attention to companies that suffered financial crisis over the last few years. Impressed by new management strategies, decreased debt, and increased profitability, these stocks are no longer the “rogue” investing scheme they once were.
These stocks, also known as micro-cap stocks, are stocks traded off the major exchange for significantly less than traditional stocks. They are traded “over the counter” using the phone or online trading platform, without a broker. These stocks generally trade at less than $5.00 a share and are not regulated by the same filing and listing policies as more traditional stocks. If a stock had been listed on a major exchange, like the New York Stock exchange, NADSQ or American Stock Exchange, the company is required to continue with its quarterly filings.
The major finance sites, like MSN Money, Yahoo Finance, and CNBC are not dedicated penny stock sites, but they do provide some information about these stocks. You may find some information on companies analysts believe are “on the bubble:” and poised for main stream expansion. In some cases, these sites re also providing daily alerts as some “hot” stocks. If you are trading via an online trading platform, you may also see delayed quotes and listing prices. Depending on the level of customer and client service offered by your platform, you may or may not have access to a broker or analysts’ research.
In order to make an informed decision about buying and selling your stock you will want to conduct some additional research about a company’s debt, profitability, liquidity, and sales numbers. There are a number of stock sites, whichare dedicated to helping investors pick the right stock.
Analysts and writers working for these sites take national trading trends and interpret them for the penny stock market. These dedicated stock sites provide daily “hot sheets” filled with projections and tips for successful trading session. These sites are updated regularly and have the most dedicated penny stock content. A determined investor will take these tips and use them as a jumping off point for their own independent and unbiased research.
The biggest assets of these stock sites are the chat rooms and discussion forums. Usually reserved for members and subscribers only, these online chats provide investors with the opportunity to learn with and from seasoned investors. Penny stock investors can discuss hot tips and trends among peers. Many sites encourage investors to post their portfolios, giving members an opportunity to see real time data, profits, and losses.
- January 7, 2016 at 12:47 pm#392Anonymous
The OTC Bulletin Board or Over the Counter Bulletin Board is an advanced technological and electronic system in United States for Stock Market offered by the NASD or the National Association of Securities Dealers. It is used for finding out the exact quotes of the shares, prices at which they were previously sold, and a total amounts is shares floating in the market of the specific company, of the companies that are not listed on the NASDAQ stock exchange or national securities otcbb STOCK EXCHANGE.
OTCBB requires its companies to follow certain rules and regulations. This includes organizing files of latest financial statements all the time. How ever, requirements, which are required by New York Stock exchange or Nasdaq need not to be complied in order to start trade on OTCBB. Companies which do not fulfill the requirements by SEC like meeting minimum capitalization, minimum share price or other requirements are delisted from Stock exchange and there shares are then quoted on the OTCBB. These companies are quoted on Pink sheets also.
In OTC market, stocks are usually not traded much because of the high risk factor involved in it. These stocks are called as microcap and penny stocks. These are the stocks of the companies which have a market capitalization of US $300million and less. The shares’ prices get manipulated easily and there exists a high risk of fraud so investors try to avert it.
Stocks were traded traditionally on OTC by buying them directly or through the telephone. However, since the evolution of the internet majority of the stocks are traded via the internet thus bringing a new turn to OTC trading. This system is known as Trading Software Platform.
The procedure for stock trading involves a simple routine. A stock trading access is required to the OTCBB market which is provided by the broker. This access authorizes the trader to trade (i.e. to buy and sell) OTC stocks based on real time, which are then compared to an online stock market trader. In OTC trading, there is large distance between ask and bid prices. Numerous advantages are involved by following the method of OTCBB making the conventional method outdated and obsolete.
Online OTC trading of stocks is very advantageous for the trader. Firstly, its way too time saver. Secondly, it doesn’t require much effort since all the date of whatever is happening in a stock market can be seen on a single screen. It provides real time access to the stocks. Even the investor can trade stocks on its own without taking the services of any stockbroker. Buying and selling is done in a speedy manner. Major OTCBB markets like DOMS, Finance 500, SBSH, Citi group can be accessed directly.
With OTCBB online the investor gets the capability of dealing into commodities, stock markets, futures, trade options using a single account. Such advantages and convenience make this system very appealing to the investors who want to opt stock markets as their full time business. Due to these advantages and real time access to the stocks’ knowledge, most brokers have opted for this OTCBB system.
- January 7, 2016 at 12:50 pm#393Anonymous
By definition over the counter stocks are stocks that are traded through broker dealers not through centralized stock exchanges. Simply all stocks which are traded outside major stock exchanges like Nasdaq and NYSE are considered as Over-The-Counter (OTC) stocks. Attention that although Nasdaq work as a system of broker dealers connected with a central computer it is not considered as an OTC market, even though some claim so. The two major over the counter stock trading markets are Over the Counter Bulletin Board (OTCBB) and Pink Sheet.
The companies, of which stocks are traded OTC, may be new companies, small/growing companies unable to meet minimum requirements of major stock markets or companies delisted from major stock markets (also known as unlisted). The stocks from these companies are usually known as penny stocks or as micro cap stocks. Remember that OTC market also trades government & municipal securities, corporate bonds, asset-backed securities and mortgage backed securities.
As said earlier, over the counter stock trades are done via direct interactions between brokers and market makers either through phone or computer network. The market makers are the holders of OTC stocks, who on demand sell them to the brokers. The price of the stocks are determined by negotiation between the market maker and broker through a process of ask and bid, not as auction bidding as in the stock exchange floor. So a trader want to trade OTC stocks must first open a trading account from one broker, either discount or full service, offering OTC trading service. Then he/she can place her order through the broker. Today there are also some online stock brokers who allow traders to interact directly with the market makers.
OTCBB and Pink Sheet market differs in their listing requirements. OTCBB market demands some minimum requirements from companies to list and remain in the market. These requirements are somewhat easier to maintain than the NYSE requirements. On the other hand Pink Sheet market does not need any minimum requirements to be listed. This easy in listing makes both of these markets vulnerable to trade. The companies listed may not have proper financial background and history; in fact, many companies delisted from major exchanges can be on the verge of bankruptcy.
OTC stock trades involve more the chance of loss than profit. It is a market known for frauds and for its volatility. Some problems that OTC markets have involves no/easy minimum requirements making bad companies to be listed, serious lack of company information like financial history & present status, low liquidity making selling of purchased securities difficult, price manipulation on certain stocks by brokers, and cheating advertisements through all sorts of media highlighting false advantages of company/broker/market.
Even though with all these demerits, over the counter stock trading is increasing its popularity. The new advancements in information technology and tracking methods improved availability of company and market information. Also a number of companies listed in these markets are growing speedily to make their way into large stock exchanges. On a recent trend, many companies qualified from OTCBB for large markets have chosen to remain in over the counter trading, as they believe is the perfect trading method for them. This increased the reliability of the market. The rules enforced by National Association of Securities Dealers (NASD) also contributed on that.