Many of you have seen the movie Wolf of Wall Street with Jordan Belfort. In that movie, they were trading penny stocks that are called Pink Sheets.
These penny stocks trade over the counter (OTC), which means they are not listed on the NYSE or NASDAQ exchanges and are companies that don’t have to adhere to strict financial requirements required by major exchanges.
To be listed on the largest national exchanges you must be fully transparent about your financials, and your stock must remain above $1.00 per share.
We Avoid OTC Penny Stocks
Companies that are not willing or able to provide complete financial documentation, who cannot keep their stock above $1.00 per share, or who are in bankruptcy filings, will trade on the OTC markets.
We do not trade penny stocks trading over the counter mainly because of the lack of liquidity along with the lack of regulations in the OTC market. They are far more susceptible to manipulation which makes them dangerous to trade.
Listed penny stocks, or stocks trading on an exchange like the NYSE or NASDAQ is where we focus our attention. They have the ability to make huge moves intraday and are cheap enough to put on large positions.