How to Buy Over-the-Counter Stock

Over-the-counter stocks are not listed on major stock exchanges, such as the New York Stock Exchange. Lacking a major exchange listing, these securities are typically purchased online through a discount broker. Search for OTC stocks on 'Pink Sheets,' a National Quotation Bureau daily listing of OTC securities. Use a licensed broker that trades OTC stock and works with appropriate market makers to get the ability to buy the OTC securities you want, when you want them.

Over-the-Counter Stocks

OTC stocks often are riskier than other securities because they have been de-listed, or removed from a major exchange, or do not qualify to be listed by major exchanges. You can find bid and ask prices on the OTC Bulletin Board and the aforementioned 'Pink Sheets.' Ask prices are the amount the stockholder wants to receive. Bid prices are the offered price of investors. OTC sellers can accept, refuse or offer a new ask price. You then can choose whether to buy or pass on the stock.

OTC Research

Along with not being listed on major stock exchanges, OTC stocks can be more difficult to research, as they usually publish much less statistical data. These companies are typically smaller or have experienced problems in the recent past. You'll need to research using valid references, such as the OTC Research Corporation -- www.otcgsw.com -- to find operational results, projections and expert opinions on the stability of OTC stocks and the companies behind them.

Online Sales

You should have no problems buying OTC stock online, but you should exercise both care and caution. Many brokers, even if they offer OTC stocks, follow prices and operating results with less interest and diligence than they do for stock exchange-listed securities. OTC stocks are called "thinly traded securities," lacking the volume of NYSE or major exchange stocks. However, you can still buy and sell these stocks online.

Considerations

The lack of information about OTC stocks demands your caution and care before purchasing these securities. Preferably, only use brokers that own and specialize in OTC stocks, as they are more familiar with the OTC differences from major market-listed securities. Evaluate the companies behind the OTC stock to learn if they are fundamentally sound and have addressed or overcome former problems. Before issuing a buy order, check their critical financial data, particularly their capital, recent sales, earnings per share, book value and unencumbered cash flow, which is cash that is free from commitments to cover operating expenses and debt payments.

Practice First

If you're a newcomer to OTC stocks, you should practice trading securities first, as do many people considering entering the volatile commodities market. There are a number of online virtual trading programs that allow you to trade stocks, futures and options without financial risk. Investigate the top programs, such as Wall Street Survivor -- legacy.wallstreetsurvivor.com -- where you can make mistakes and learn without risking your own money.

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