Buy Penny Stocks in the OTC and Pink Sheets


Penny Stocks          Penny stocks are described as stocks trading at under $5 a share. Typically most penny stocks trade at under 1 dollar. They are traded on the OTCBB and Pink Sheets exchanges. OTCBB stands for Over the Counter Bulletin Board. There are more regulations governing penny stocks trading on the OTCBB than for those that trade on the Pink Sheets. The main difference between the exchanges is that OTC stocks are somewhat regulated and are required to file information with the SEC while the Pink Sheets are not. Both trading platforms are considered highly speculative and incur much more risk than the established trading markets.

Step 1

Open up an online stock trading account. There are many online stock market accounts these days that put the control of stock trading entirely within the hands of the investor. Gone are the days when one had to place an order directly through a broker or middle man every time they wanted to buy a penny stock. These sites offer stock trades as low as $5 to over $20 per trade.

Step 2

Research the penny stock companies you are interested in trading. Since it is difficult to find information on many of them you may have to use unconventional methods. You can subscribe to online stock trading discussion groups that deal specifically with buying penny stocks. Also you may be able to get information directly through the company’s website via press releases. Try to choose stocks that you feel have positive potential for growth.

Step 3

When you are ready to buy the penny stock, place limit buy orders at the price you want for shares instead of regular market orders. Many times with penny stocks the spread or the difference between the bid and the ask prices will be abnormally large. This means that if you place a market purchase order you may end up buying the stock for a much higher price than you intended to and lose more money than necessary.

Step 4

Because penny stock prices can fluctuate wildly without notice a good safety measure is to set stop orders when buying a stock. A sell stop order is an order to sell the penny stock if the price of the stock goes below a certain value. By doing this you can stop yourself from losing a lot of money if the penny stock happens to take a nosedive and you are not around to trade out of the stock.

Step 5

Beware of information you receive about penny stocks. Much of it can be biased or just not even true. Because the penny stock companies do not have to disclose much information if at all to the trading markets any piece of information you receive should be believed with a grain of salt.


Additional Advice

                   Penny stocks are highly speculative forms of investment with very high risks. The rewards can also be great but you have to be willing to deal with the risk.

                   Buy penny stocks with discretionary income. That is, use income that is not necessary to your survival such that you can afford to lose all that money and still be able to pay for your necessities, i.e. rent, food, utilities, etc.

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