Introduction to the penny stock OTC market
If you’re a penny stock trader you most likely trade in the OTC market every day
… even if you don’t realize it.
In this 2 part series you’ll learn what the penny stock OTC market is and how understanding the market can help you make better trades that are more suited towards your risk level.
What is the Over-The-Counter Market?
The OTC market stands for Over-The-Counter market. It’s considered to be a “decentralized market” where securities under a certain price are listed(usually under $2.00). Stocks on the OTC market are traded either over the phone or electronically and have no physical trading floor.
What sets the OTC market apart from the rest of the stock market is that there is no central physical exchange for this marketplace of securities.
In the OTC market trading happens via a group of dealers called market makers who have a large quantity of securities. These market makers arrange the flow of buy and sell orders coming from traders to insure liquidity in the market.
Closing Words
The Over-The-Counter (OTC) market is quite different from markets like the NYSE, because it is decentralized & thus has no physical exchange. This is an important factor to consider because it greatly affects the “fill-rate” of orders on the OTC.
Continue reading our series on the penny stock OTC market and learn more about how understanding the Over-The-Counter market can improve your entry and exit strategies.
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