How It Works

Have you ever wondered what makes the OTC market tick?

Why is it that OTC stocks can make huge price gains that seem to happen for no reason?

Why do some OTC stocks seem to go straight up for a while but then come down faster than they went up?

What can I do to make money in these stocks and not lose my shirt?

Anyone trading this market needs to know the answers to these questions before they will have any success with penny stocks.

Once you understand this market, half the battle is over and you will make smarter trading decisions.

Ready?

Let’s start with some facts about the US OTC markets:
- There are over 10,000 companies that trade on these markets
- Each day this market trades close to a BILLION dollars of volume
- There are close to 100,000 trades each day.

In other words this is a very active market, every day investors go out in search of the next great company.

The OTC market is filled with early stage companies. This means that, for the most part, they all have limited revenue and resources to carry out their business plan. Because of this, these stocks are very volatile. The prices of penny stocks mirror the exact sentiment of the market. If investors are excited they run up, if they are frustrated or nervous the market will swing in the other direction very quickly.

There are no specialists in OTC stocks like they have on the NYSE. The specialists job is to step in when there is an order imbalance and buy or sell stock out of their own account to balance out the order slow down price swings. (To me this sounds like market manipulation but who am I to say?) Anyways, because OTC stocks do not have specialists the market exactly reflects what orders are out there and because there is a heard mentality in this market the swings can be large.

Capturing these price swings allow the educated trader to put money in the bank.

Our goal is to make sure you are one of the educated traders.

OK, ready to go?

Let’s start with a very basic question “Why do stocks go up?”

Most people will tell you stocks go up because of the quality of the company, technical analysis, fundamental analysis, earnings or news.

Those answers may be contributing factors but it is not exactly right.

Stocks go up because there are more buyers than sellers. PERIOD.

The reason this is important to understand is because EVERY DAY we see penny stocks that don’t seem very high quality, have horrible charts, no financials, and boring news make big price gains.

When it comes to penny stocks and making a profit, company quality often has nothing to do with it.

Penny stocks are for trading, not long term investing. When it comes to long term holds, company quality is everything. When it comes to short term trading, quality means almost nothing.

In the end, as long as there are more buyers in a stock than sellers prices will go up.

So this leads us to the question “how do I go about finding OTC stocks that may have more buyers than sellers”.

The simple answer is follow our newsletter we do it for you. 

The long answer is to find the stocks that are currently being advertised. These are the stocks that will be in play each day.

You may as well forget about the rest. For the most part the penny stocks that are moving are the ones everyone is talking about.

If you have any doubt about this, go to pinksheets.com or otcbb.com and see which companies issued news that day. Then check the volume and price, you will notice that most of them barely trade above their average daily volume and have little to no price change.

This is because there are so many companies out there that it is almost impossible to get noticed their own.

When penny stock companies need to get their story out they hire IR/PR
Firms and media buyers to put together advertising campaigns designed to generate exposure to the investing community.

When you see a penny stock making a BIG price gain, and it seems to have come out of no where, chances are it didn’t, the move can almost always be traced back to one of these exposure programs.

Light Bulb Moment !!!!
These advertising campaigns drive investors to penny stocks. We know that more buyers than sellers sends stocks higher. Knowing which stocks are undergoing an awareness campaign is the first step to putting money in your pocket.

OTCStockExchange specializes in sending alerts with profiles of companies looking for exposure. This way you stay informed and know what stocks are “in play” so you can get yourself in a position to profit from gains.

HOW IT WORKS
IR firms and media buyers are hired to generate exposure of a company.

The advertising campaign begins and hundreds of thousands to millions of new investors see the story in a short period of time.

Smart traders jump in right away as soon as a new campaign starts knowing their odds of booking a profit are the highest at this point. (this needs to be you)

Some investors see the advertisement, will like the story, and buy the stock.

This will creates a spike of above average trading volume and the price often heads higher.

Now the stock shows up on market scans investors are using to find out what may be hot the next day.

Some of these people will jump in as well. This creates even more buy side volume sending the stock even higher.

At this point the message boards and chat rooms may heat up as more investors are trying to find out what is going on.

Some of these people will want to get in on the action as well sending the stock higher still.

This frenzy lasts anywhere from hours to weeks depending on the size and length of the advertising campaign and how good the story is.

Light Bulb Moment !!!

Let me make this simple, Do you think it would be a good time to buy a stock if you knew that hundreds of thousands or millions of people were going to find out about it over the next couple days or weeks?

Well because the federal securities laws require that advertisers disclose the fact that they were paid, in what form, how much and by who,it makes it pretty easy once you know what you are doing to track these campaigns down.

Or, let us do it for you. It is what we do. Follow our newsletter and we will tell you what companies are being advertised.

Now you know how it works, please check out our trading strategies section to learn some times tested strategies you can use on these fast moving stocks.