Nothing could be as lucrative than to trade in penny stocks over the counter or OTC for short. To begin with they are priced ridiculously very low costing just few cents or pennies each. In fact such micro stocks that are traded over the counter can never exceed $ 5 as per the strict SEC guidelines, if it is at all to qualify as penny stocks. Because they are priced exceedingly low, investors who look forward to make huge fortune by trading in stocks, buy penny stocks in large volumes hoping to trade them for big profits at the right opportune. How To Trade Otc Stocks
So for the same price at which you may be able to buy one or two stocks of a high priced blue chip stock you can buy quite a large number of these penny stocks of two or more small companies. Over and above one can even expect to see the price doubling up in a day or two, which is simply not possible for mid cap or large cap stocks traded on national stock exchanges such as the NYSE, NASDAQ or AMEX. Undoubtedly anyone wanting to build a huge fortune say by earning millions in a year or two can only hope to do so by staking their money in penny stocks of various small companies having a capital thats less than $ 200 million.
Why Penny Stocks are both Risky as well as Lucrative for Trading
Moreover a slight swing in the positive direction may raise the value of OTC stocks also called micro stocks few hundred times more in a day or two, which is simply unthinkable for large cap stocks.This happens because of their high volatility in their value that may climb either very high or very low than what its priced currently. Its because of this great volatile nature that what provides the requisite momentum to penny stock pricing as trading progresses by the hour. Such volatility can be so unpredictable many a time that it even becomes difficult for a highly seasoned trader to comprehend in which direction would the price actually follow. Its very much like the wind that can be a breeze or suddenly blow up into a storm at times or there could be total lull with no movement at all. The same is true for penny stocks too. There could be times when there is no trading at all and the penny stock has no takers for months if not years although when you brought them at a great price, there was tremendous interest and momentum in trading at that time. This alone makes trading in penny stocks so risky from an investment point of view. In fact penny stocks follow no scientific principles that would help you to guess its value at some point of time, like you might do so regarding the position of stars or comets in the heavens.
However as I have already mentioned if things work out in your favor then perhaps you have a better chance to win and make a fortune as you may do so while playing pokers or maybe slot machines. As part of your planning process you can choose your own best strategy to suit your temperament and the constraints of limited resources available at your disposal. What you can adopt best is a defensive tactics to minimize losses. To do so you have to find stocks of those companies that are in business which has substantial demand in the market as well as have a great future for growth and expansion. The sectors are perhaps those of Bio stocks, energy stocks or something niche which has tremendous potential that you can foresee. You have to scout such undervalued stocks that has been missed out by others and invest in them so that you may cash them when things are ripe. How To Trade Otc Stocks
What all Winning Strategy to Apply for Trading in OTC Penny Stocks
Now as per statistics 95% of investments fail hence its always best to spread your risks by diversifying as much as you can when trading in penny stocks of various OTC companies. Even if 95% of your portfolio fail and fall badly at least the rest can climb so high in value that it can pay you back several hundred times the value of your total investments. Once you recover the initial amount invested you can then play with house money i.e. with the surplus that you gained in returns. That is how it is not surprising to find many success stories where investors who dipped their toes into the stock market by investing just $ 200 in various penny stocks were able to make hundreds of thousand dollars in a year. This is what makes trading in OTC and pink sheet stocks so lucrative even though penny stocks are risky because of their great volatility.
But that is only one approach to a problem we have discussed.On the contrary there is no single full proof strategy for water tight solutions, in fact every single solution gives rise to yet another set of problems that has to be solved. Since it is not possible to predict what all problems might crop up eventually during trading it is best to stick to patterns. The more trading patterns you recognize from past history or experience, the better would it be for an investor. By analyzing each of these patterns you might at least recognize how a penny stock would behave provided all factors currently in tussle in the market remains as it is in the next few days without drastic change in “weather” patterns. How To Trade Otc Stocks
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