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The Road to Understanding: Beating the OTC Stock Market

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Understanding the OTC Stock Market

otc stock marketCommon wisdom will tell you that understanding the market is imperative to making successful investments, but the fact remains that many investors do not understand the OTC stock market nearly as well as they should. OTC stocks, or penny stocks, are generally seen as high risk investments that occasionally pay off big. At less than five dollars per share, the stocks are cheap and most investors throw their money at them with the vague hope that they will somehow randomly choose the winning stocks. It is no surprise that many of these investors lose their money. An investor with an understanding of the OTC stock market is much more capable of reading the signs and predicting the market’s movements. Many investors find that even a little bit of knowledge can result in fewer losses and larger returns.

How Does the OTC Stock Market Work?

Like other over-the-counter products, stocks from the OTC stock market can be seen as low-cost versions of their regular market counterparts. Like other over-the-counter products, these stocks can also vary in quality. The pink sheets that list OTC stocks require companies to provide very little information and many of these companies are new and have little financial history. Additionally, the SEC need not certify a stock in order for it to be listed on the pink sheets. Because of this general lack of information, many investors assume that most of these stocks are impossible to predict. This is not, however, necessarily true. Even a small amount of research on a company’s financial structure can reveal to the trained eye how the company’s stocks will perform. For investors who may not have that eye, there are numerous online tip sheets and resources that can help them make sense of the OTC stock market and help them make decisions based on information rather than on hunches.

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