Syndicate
Trading OTCBB Pink Sheet Stocks
As you can notice, trading stocks on the OTCBB and Pink Sheets presents its own distinctive set of challenges. Buying and selling requires carefulness and refinement. It's more or less like handling a poisonous snake. You can pick up the snake and admire its beauty if you know what you are doing. You are going to get bitten and it is going to hurt badly if you do things wrong! While you can treat a snake bite with anti-venom to restore your life, no magic potion can be found to put money back in your wallet if you were to bumble through an OTCBB or Pink Sheet transaction.
So, what if you still want to trade penny stocks? Technically speaking, some people consider a penny stock to be whatever that trades for five dollars or less. There are a number of AMEX and NASDAQ stocks that without difficulty fit this bill. Before we proceed, here is a question for you. Why would you want to limit yourself to penny stocks? Why not take microcaps into consideration? Both of them offer the ability to obtain shares at reasonably cheap prices and both of them have the potential for large gains. Penny stocks made up a large portion of our portfolio when the markets were flying high five to six years ago. Nevertheless, we have shifted to heavier positions in microcap stocks after the bursting of the internet bubble. We still trade OTCBB and Pink Sheet stocks, but they make up a much less significant percentage of our portfolio than they did in the past.
We have tried many different strategies to find prospective investments over the years. Candle stick analysis, cup & handles, bow-ties, etc...We have tried them all. We have come to the realization that we prefer a much simpler approach to finding great investments after dabbling in these various different methodologies. We have been utilizing a screening strategy that has provided us with some excellent returns in trading microcaps. We use a stock screener accessible on our online broker's website. It is easy for you to do the same. Your stock screener does not have to be fancy and pretty much any will do. We use a stock screener to locate stocks that fit parameters that we are comfortable with. If we like what we see in our due diligence, upon identification of these stocks, we will add the stock to our portfolio. A "microcap mutual fund" is, in essence, what we have created. We tend to have about fifteen to twenty stocks which we continuously monitor and adjust in this microcap mutual fund.
We set the screener for a maximum share price of twenty dollars and a market cap of $500 million or less to ensure that we get a microcap stock. We like stocks that are near their lows, so we set our screener to find stocks that have decreased in value during the past year. This may perhaps be divergent to the opinion of many investing experts. Many of them say that when a stock is going down, it is headed south for a reason. They regularly give an opinion to wait until the stock has established a sustained upward trend before taking a position. We think that this is sound advice, but it is not what we like to do.