How to Survive the Over the Counter Stock Market

I don't have to tell you that when it comes to stock market investing it's a dog eat dog world! Make one small mistake and you can see years and years of careful savings and investing evaporate in the blink of an eye. But the over-the-counter stock market, that's a whole different beast completely! The OTC market is the wild wild west where just about anything goes. If the regular stock market is dangerous, then the OTC market is life threateningly dangerous...

Why is that? Because the OTC market deals with small stocks that are very thinly traded. Even without shenanigans, a stock may just drop out of the sky because the company is simply not very good. But under the worst of circumstances there are all kinds of crazy things that can go on including manipulation and insider trading because this market isn't as tightly regulated as the major stock markets are.

Still, there are some things that you can do to help insulate yourself from most of the danger and that's what I'm going to talk about in this article today.

The first rule is to only invest when you have a clear idea of why you want to invest. Many times we buy OTC stock simply because it's so cheap and we stand to make a killing if it increases even a little. That is no reason to buy a stock. You should only buy stock for sound fundamental reasons, i.e. the company is a good company that has good prospects for future growth. Without that future growth, there's no reason to invest ever.

The next rule is to realize that over-the-counter stocks are almost always short-term plays. This means that you should never buy one without a clear selling target in mind. The stocks tend to fluctuate wildly in prices and in no time at all your sell target may be reached, sometimes quicker than you expected. If this happens, pull the trigger and sell immediately even if you're tempted to ride the wave a little longer. What goes up quickly can drop down just as quickly in the OTC market!

Next, realize that up to 85% of all new issues will usually be selling below their issue price within the first year and a half because most of these new stocks are overpriced when they are first issued and after the first year or so the buzz has worn off and the stock drops.

Next, pay special attention to the auditors of a new issue. You can find out who the auditors are by reading the prospectus carefully. If you've never heard of the auditor, that's a red flag and you should maybe consider running away. Auditors are all about reputation. Without a reputation and auditor's numbers are just that... numbers, they may not mean anything!

Finally, do some research on the underwriters. If the brokerage firm that is underwriting the OTC issue has been in trouble in the past with the SEC, this may be a clear indicator that your OTC stock is not as solid as it may look. Good companies use good auditors and good brokers for their underwriting. Less solid companies take what they can get.

Investing in OTC companies can be a lot of fun, just as I'm sure living in the Wild Wild West way back when was also a lot of fun. If you think you've got the temperament then I wish you all the luck in the world, not that you'll need it!

Jason Markum has been an article writer online for the last 14 years. When he's not writing about investing, he has fun running a clearance patio furniture web site where he reviews bistro patio furniture for your deck or patio needs.

Article Source: http://EzineArticles.com/?expert=Jason_Markum

Swing Stock Trading

Swing stock trading is a short-term method in which stocks are held for a few days or weeks. This trading style lies somewhere between the day trading and long-term investments. A day trader may hold on to a stock only for a few minutes or hours, whereas the long-term investor may hold the stocks for months. Swing stock trading depends on the minor variations in the stock prices. It is never dependent on the market index. Profits through swing stock trading are earned irrespective of the market conditions.

A swing trader capitalizes on the predictable constant market imbalances, which the day trader or long-term investor may not care about. He/she values the short-term momentum and price patterns of the stock, rather than its fundamental value. In swing stock trading, the risks are lower. There is less competition from the big time investors. A person engaged in swing stock trading does not wait for the perfect timing, when stocks may reach sky-high heights or rock bottom. He/she simply trades them when there is a significant price fluctuation. By ignoring the perfect timing, though, the trader may miss an opportunity for earning huge profits. Although swing stock trading may not guarantee the large profits earned by long-term investors, it assures small profits at short intervals.

Swing stock trading is best suited for the newcomers in the stock market. The low-risk and quick returns prove attractive for the beginners. Even the medium and top level players in the market can occasionally leverage on this trading style to earn some respectable profits.

Moreover, swing stock trading is a good motivator for the traders due to the quick results that one can get within a few days. A trader wishing to succeed in this trading system must choose the right market and the right stocks. Swing trading cannot be applied in a market where the stock prices are rising or falling rapidly. Here, the stock prices tend to go in one direction without fluctuating. This kind of market is more suitable for the long-term investors. A swing trader must deal with stocks that are actively traded in most stock exchanges. These shares usually belong to firms that have large market capitalization.

Swing Trading provides detailed information on Swing Trading, Swing Trading Strategy, Swing Stock Trading, Swing Trading Systems and more. Swing Trading is affiliated with Option Stock Trading

Article Source: http://EzineArticles.com/?expert=Thomas_Morva

The Good & The Bad of Online Stock Trading

In order to get consistently positive results from the online stock trading system, you have to have a system of your own. You wont consistently pull positive returns from online stocks if you follow a rag tag system. To help with your investing, here are a couple methods that will give you some direction as to where to start with your online stock trading system.

One system you can use is to buy equal dollar amounts of the 10 DJ stocks that have dividend yields. Hold these companies for one year, and then adjust your portfolio to hold the current “Dogs on the Dow”. What you are doing is buying companies who have decreased in favor and their stocks have lowered. The goal is to buy companies that have a high hope of rebounding, and therefore you will gain money out of it. There is an element of risk though because sometimes the companies don't have substantial financial strength to pull them out of hard times and you could ultimately end up losing money.

Another method involves investing a fixed dollar amount monthly, or annually. If the prices increase, you will receive fewer shares for your money, while if they decrease you will receive more shares for your money. The price is up to you, and you will have to commit to not going over that price. Depending on the fluctuation of funds, you could lower the funds slightly. This strategy involves meeting a prescribed target by adjusting the amount invested, up or down. Dollar-cost averaging takes advantage of the 1/x curve non-linearity. Value averaging when the value is down goes in a little deeper and when value is up in a little less. But be careful because when you are dealing with a declining market neither approach will bail you out.

A last strategy is a system called “Hedging”. The most simple method of hedging, but also the most expensive, is where you buy stocks that you own a put in. To cover general market declines, buy a put option on the market, and sell financial futures to hedge.

The best, and least expensive, method of hedging is to buy stocks from one company, and then sell those stocks to the company's competitor. Futures are the cheapest way to hedge an entire portfolio. Remember that the efficiency of the hedge depends on the estimated correlation between the broad market, and your high-beta portfolio.

These methods are just some of the ways that you can increase your profit, or lower risks in online trading. To become a professional online trader, find a system that works for you and stick with it 100% of the time. If you change your systems up and try new things, you could screw up your trading system more easily.

Online Stock Trading Secrets, Information and Resources at http://stocktrading.selfhelppage.com/

Article Source: http://EzineArticles.com/?expert=Chelsea_Aubin

Stock Option Trading (Basic Information) by Jorge Malo

It is no secret that 2008 was a terrible year for most stock investors, and most probably things are going to get worst in the future. The US and the World economy are in a recession that will probably last at least for the rest of 2009. The recession translates into less demand for products sold by companies, which means less profits from companies and then lower stock prices. In very simple terms this is the summary of why the stock market is going lower.

If you are an investor that is loosing money on your stock portfolio, maybe you should take a look at another market that can help, the Option Market. Most investors don't know anything about stock option trading, or stock option strategies, or what is a Call or a Put option. The truth is the Option Market is a sophisticated market mostly used by professional investors. But this does not mean individual investors should stay away from it. There are many firms that will offer you advise on this market (for example www.teofutures.com), others will offer you newsletters and education so you can familiarize with this market.

It is not my intention to explain in full detail about the option market, but these are some of the most important characteristics about stock option trading:

1.- You don't need a lot of money to trade this market. In general terms you should open an account with minimum $10,000 in order to be able to diversify that money into different stock option strategies. Some firms allow you to open with less than that, but based on experience accounts that start with small amounts of money generally loose 100% of their investments.

2.- When trading stock options you can bet that the price of a stock will go higher or lower in the future. This means you still can make money even though the markets are down.

3.- Stock option investing is a fast investment. You don't buy and hold when trading options. You buy and sell, sometimes even in the same day. When purchasing options, usually the more time you keep a position the higher your chances of loosing money.

4.- Trading options is considered risky because you can loose 100% of your investment capital and with some stock option strategies you can even loose more money than your original investment.

5.- Be very careful whom you open an account with. Preferably follow strategies where you only buy Options (Calls or Puts) or spreads. Stay away from firms that will offer you guarantee returns or spectacular profits. As a rule of thumb anything between 0% and 120% return a year is an actual real return to obtain from Option trading. Returns of 500% a year, or turning $15,000 into $200,000 in 18 months, or 100% returns in the first 6 months, it is better to stay away from those offers. Maybe you can obtain those returns but the risks are very high so chances are you most probably loose all your money trying to obtain that type of results.

As mentioned before, stock option trading could be a very good alternative to help investors during these difficult times. Don't invest all your capital in this market and be very careful whom you work with. Specially stay away from guarantee returns.

About the Author

Mr. Jorge Malo is President of TeoFutures, an investment firm in Florida, which specializes in small retail investors interested in trading the option markets. More information can be found at http://www.teofutures.com.