By admin2 | June 18, 2009
The Pink Sheet market is a unique financial market in many senses. It lists some of the lowest priced stocks with high growth potential and also lists some stocks with high susceptibility to scams. That is why trading pink sheet stocks demands better strategies and skills. As a trader, you need to sharpen your basic trading skills such as stock research, stock screening, market timing and risk management. Brokerages, however, are becoming increasingly more discriminatory on accepting pink sheet trading and certificate deposit. NobleTrading is a pink sheet friendly broker/dealer. To open a new account visit http://www.nobletrading.com.
Many traders agree that pink sheet stocks (stocks with symbol PK) carry more risk than major exchange traded funds; because they are low priced, are of small/less important companies and are avoided by big market players such as institutional traders and funds. But it is also true that some of these stocks show high growth rate and offer better returns. This is because of the fact that a small company can easily double or triple its size (and its stock price) compared to a big blue-chip company.
Here are some basic tips for pink sheet stock traders.
Conduct broad research – The major disadvantage of trading pink sheet stocks is lack of fundamental info. Get all the information you can get; and also do better technical analysis to overcome the lack of fundamentals.
Use tight stop-losses and targets according to your trading style. The lack of liquidity of pink sheets makes them highly volatile. Thus holding a stock for an extended period can harm you.
It is better to avoid stocks at the extremes. For example, avoid stocks showing extreme positive/negative growths, and stocks which are extremely low/high priced.
Pay less attention to rumors and spam mails. It is better to avoid all those junk mails which describe this week’s/today’s hot pink sheet stocks. Use your common sense to find better resources.
Be careful with your position sizing. Pink sheet stocks, with their cheaper prices, can attract traders to trade with big position sizes. Large position sizes can be good only when you are trading a highly liquid stock with less price volatility or when you are trading for very short term.
Online pink sheet trading. Now there are some brokers who offer online trading of pink sheet markets on powerful trading systems. This offers traders more flexibility, technical tools and time for technical analysis, which will enable them to make better trades.
Consistently evaluate your performance and strategies. Going through your past performances and strategies is vital to survive in the ever changing market.
Comments
June 18th, 2009 at 7:31 pm
Pink sheet stocks carry more risk than most other fully reporting stocks but I have made more money with pink sheet stocks than any other investment. I prefer OTCBB stocks,American Stock Exchange now the New York Stock Exchange, NASDAQ but if you do your own research, talk to management, visit the corporate office you can take alot of the risk out trading pink sheet stock.
Having said thatlook what happened to so-called Blue Chip stocks with audtied financials, big accounting firms, large New York law firms backed by even bigger Wall Street investment banks.Billions of dollars in shareholder value were wiped out. Any time you let your money out of your hands there is a greater risk of loosing it no matter how much assurance you receive from thrid parties.
June 29th, 2009 at 5:06 am
[…] the original: Pink Sheet Stocks Trading Basics | Small Cap Stocks Blog Categories: Uncategorized Tags: growth-potential, high-susceptibility, lists-some, lowest, […]
September 3rd, 2009 at 11:25 am
I started with 100 bucks five months ago, I didn’t know exactly what to do, but I did my own research and today My account has 40k in it.
I think not knowing all the junk out there I was able to invest and develope my own style and take huge chanses even if I lost the whole ball of wax, I still only started with 100 bucks