How do you trade OTC stocks?


Quick Answer

To trade over-the-counter stocks, select a broker-dealer, make an investment decision, define the order type and execute the trade so that the broker-dealer settles it, notes OTC Markets. Trading on OTC markets is similar to trading on standard markets, such as the New York Stock Exchange, with prices being determined by supply and demand.

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Full Answer

Select a Financial Industry Regulatory Authority-registered broker-dealer to begin trading OTC stocks, explains OTC Markets. FINRA is a nongovernment-regulated body focusing on investor protection and market integrity, reports FINRA. After selecting a broker-dealer, research several companies utilizing various analytical tools. Research tools are available on the OTC Markets website for securities that trade on the OTCQX, OTCQB and OTC pink marketplaces. Additional information, such as trade data and company financial statements, is also available.

Once a company is selected, define the order as either a limit order or a market order. Different brokerages have various limits related to the order types. Limit orders allow investors to specify an exact price they are willing to accept for a buy or sell order, reports OTC Markets. Limit orders do not guarantee execution if the specific price is not met. Market orders direct the broker-dealer to immediately execute the trade based on the active trading price. After selecting the trade type, ensure that the broker-dealer executes the order. Look for any confirmation emails or receipt page.

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