Taking the Risk out of OTC Markets

Contributed article in our financial series. Enjoy! – Kimberly

Trying to make money in any market entails a certain amount of risk. That can come from buying a blue chip stock on the New York Stock Exchange or from trading on OTC markets. The difference always is the nature and size of the risk. So being able to manage risk is vitally important as a trader or as an investor. It is arguably the most vital skill to learn when you wade into the financial markets.

Being a trader and being an investor are two very different things. Traders, even though they are smart and focused and diligent, live for the moment. They are going to make money by pouncing on opportunity, never letting the trend get away. Investors, on the other hand, tend to be much more methodical. Which is a good way to make small profits over the long-term, setting you up for success in your golden years.

Methodical is nice, but it can be boring. You can still make your way to financial freedom with a more aggressive style, provided that you handle the risk involved. There is very little that novices can gain in OTC markets. Those exchanges are dominated by companies with very low standards for financial disclosure and need to be approached with caution. This is where the novice day trader can meet an early and ugly demise. By losing a healthy amount, or even the entire amount of their savings.

These markets are havens for pump and dump schemes. That is where a company or investor buys up a majority of shares of a small company and initiates a PR campaign to tout the company and its revolutionary products or business practices. These days, it is happening very often in biotech or fintech stocks. After the value is pumped up enough, the original investor has sells off their majority, flooding the market with the company’s share, netting a nice profit, while latecomers enticed by the sales pitch lose out.

So the question for aspiring day traders becomes, where to start? The best way to begin is with a day trading education site that will allow you to learn from veteran instructors, merge with other traders in chat rooms and practice your trading strategies in simulated environments that work with virtual currency. These day trading schools are essential to making it to the 10%. What is the 10%? Well, the old school wisdom says that 90% of day traders make money. The 10% are the ones that formulate a plan and build up enough capital and risk management skills to stay alive in the game.

This should mean that OTC markets are off limits until it comes time for a day trader to really grow up. The inherent risks in these exchanges make it very hard for novice traders to stay above water. The seasoning and growing needs to happen in other, more stable exchanges before it comes time to really make it happen in OTC markets.

Day trading is an attainable day job or side gig for those that are motivated enough.

Facebooktwitterredditpinterestlinkedinmailby feather

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.