I often get asked, “What’s a listed stock? “What’s an OTC stock? “What’s a pink sheet stock? “What’s the difference, “and how do I trade them differently?” Because you do need to treat them differently. And today I’m going to talk about that.
Next thing I’m gonna talk about, and I’m gonna focus on OTCs as well as pink sheets, but you’ll hear the term listed verus over the counter stock, so, a listed stock is a stock that trades on the NASDAQ, or the NYSE, we’re not gonna talk about those today because the topic is OTCs and pink sheets.
So, what I like to say is remember, any stock can do anything at anytime, okay? Apple could go out of business today, not likely, but it could.
Now, so when we look at listed stocks on the NASDAQ, on the NYSE, these are typically your more, air quotes, real companies, they’re established, they most likely have a little bit of a track record, they’re not bleeding enormous amounts of money, they have actual products you can buy.
So when I think of listed stocks, I think of real stocks, and you can trade those, day trade those with extreme volatility, but what’s different about the OTC stocks is, and the pink sheets particularly, and the gray sheets even more, these are the most speculative of the speculative, and they’re gonna be the true penny stocks.
You’ll see a lot of NASDAQ stocks, you know, for one dollar sometimes a little under a dollar, two, three dollars, but in OTC and pink sheet land, this is where you get the one cent stock, the thousandth of a penny stocks, and these are the most speculative, which is great from a trading perspective, because now you’re looking, these stocks, as what’s called purely a trading vehicle.
The reason we talk about bag holders so much is people will believe the story in a listed stock and maybe it’s, some stock that is long term down trending, it’s gone from 100 dollars, to 50 dollars, to 20 dollars to 10 dollars, and many traders kind of fall in love with the idea behind the trade, because it’s, again, a real company.
What’s great about the OTCs, and this may sound counter intuitive, is everybody knows most of these companies are scams, most of ’em are gonna go out of business, if they stay in business, they’re probably gonna pivot from a weed company to a gold company, to a blockchain company, they’re always out there, trying to raise money, trying to sell more stock.
So what I love about them, is it makes it very clear to you that you’re only trading the chart. You don’t believe in the fundamentals of any of these companies because lots of times they havent announced their fundamentals for months or years, many of them are very late to file their filings, may of them it’s very hard to find accurate information.
So now, especially if you’re that purely technical trader, you’re just gonna look for simple breakouts, high volume moves, through key levels, breaking resistance, all these things we talk about on other articles on this blog.
Which reminds me, check out our library, we’ve got a ton of articles talking about chart patterns, lot of the times I’ve got a screen right up, breaking this stuff down.
Now, how do I trade an OTC stock or a pink sheet stock?
I’m running my scans, I’m looking for breakouts. Whether that be multi week, multi month, or even better, multi year, the longer the break out, the longer it’s taken this stock to break out, the more likely it is to continue, because now it’s had that time to lure in all of the buyers over days, weeks, months, et cetera.
So now if I can find that OTC or that pink sheet stock that ideally has a story behind it, maybe it’s a weed stock, maybe it’s a gold stock, maybe it’s a cryptocurrency stock, and it’s trading unusual volume, remember these are all things you can scan for on StocksToTrade, unusual volume breaking multi month, multi week, multi year levels, that is a stock you’re looking to trade.
Then, you’re just looking to base your stop loss based off of support and resistance levels. So it’s really great as a technical trader, to trade these because now it’s just the chart, you home in on the chart, that’s all you care about, cause you know the company’s probably a scam, you know they’re never gonna make any money, and you know that the only reason the stock is going up is because traders are doing exactly what you’re doing.
Remember, the stock market is an auction.
The more buyers, the more eyeballs, the more traders trying to make the same move, the more potential that move is to continue. Because if everybody’s looking for these breakouts, and buying these breakouts, that’s how you get the multi day, multi week continued moves, and these stocks can grind up way longer than you think, as long as there’s that bid support, as long as the support holds, long as the keep continuing to trend up.
!!So, remember, the biggest tip I want you to take away from this is, feel free to trade OTC stocks, feel free to trade pink sheet stocks, but never believe the story, never believe the financials, trade them strictly from a technical standpoint.
Listed stocks, NYSE and NASDAQ, you can start building that fundamental case and looking at the balance sheet, looking at the sales, looking at their contracts, looking at their business, but not in OTC and pink sheet land.
So, lemme know below. I’m curious, do you trade strictly from a technical approach? Personally, I almost always take a little bit of both sides into my consideration when I make my trade plan, but I wanna know, do you strictly trade technicals? Cause there’s a lot of traders out there that do it, so thank a lot, and lemme know.
Thanks for reading our article.
