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WhisperfromWallStreet is the trusted source for trade ideas by over 350,000 traders and counting. From the OTC to the NYSE; day trades to position trades; our ideas put you in position to win.
If you want to make money trading penny stocks you need understand the basics of this market. This market is unique in many ways and unless you understand what makes it tick chances are you will make bad trades.
The great thing is, it’s not complicated. Once you understand how this market works theconfusion is gone and you can put yourself in a position to profit most days.
You will now be able to focus on tools, techniques and strategies that will allow you to hone your trading skills. (We spend a lot of time helping you learn these skills as you progress as well)
Ready?
Let’s start with some facts about the US OTC markets:
- There are over 10,000 companies that trade on these markets
- Each day this market trades $500 million dollars of volume
The OTC market is filled with early stage companies. This means that, for the most part, they all have limited revenue and resources to carry out their business plan. Because of this, these stocks are very volatile. The prices of penny stocks mirror the exact sentiment of the players in it. If investors are excited they run up, if they nervous they come down.
The educated trader loves these price swings. It is what we look for.
Our goal is to help turn you into one of the educated traders. In addition to sending you trading ideas our newsletter also spends a lot of time on education.
OK, ready to go?
“WHY DO STOCKS GO UP?”
Most people will tell you stocks go up because of the quality of the company, technical analysis, fundamental analysis, earnings or news.
Those answers may be contributing factors but it is not exactly right.
Stocks go up because there are more buyers than sellers. PERIOD.
So, how do you find OTC stocks that may have more buyers than sellers each day?
When it comes to penny stocks, it’s easy, we focus on the companies that are being promoted. This is where the action is.
When a penny stocks make big price gains, on big volume, chances it’s because of one of these exposure programs.
EXPOSURE CAMPAIGNS
Most penny stocks receive no analyst or major media coverage, so when they need to get their story out they have to pay for it.
IR firms (investor relations) and media buyers are hired to generate exposure of a company.
These firms use TV, radio, print advertising, pay per click ads, newsletters, and banner ads to focus the attention of investors on the story.
When these exposure campaigns begin, hundreds of thousands to millions of new investors may see the story in a short period of time.
All this exposure creates excitement, excitement creates buzz, buzz creates buyers, and buyers create volatility.
Smart traders jump in right away as soon as a new campaign starts knowing their odds of booking a profit are the highest at this point. (this needs to be you, more on this in the trading strategies section)
Some investors will see the advertisement or hear the story and like what they see so they buy the stock.
This can create a spike of above average trading volume and the price often heads higher early in the campaign.
Now the stock shows up on market scans investors are using to find out what the hot stock of the day is.
Some of these people will jump in as well, creating even more buy side volume sending the stock even higher.
At this point the message boards and chat rooms may heat up as more investors are trying to find out what is going on.
Some of these people will want to get in on the action as well sending the stock higher still.
This frenzy lasts anywhere from HOURS to weeks depending on the size and length of the advertising campaign and how good the story is.
See, the OTC market isn’t complicated at all, once you know why these stocks move it becomes much easier.
LET’S RECAP
More buyers than sellers make stock prices go up.
Advertising/investor awareness campaigns generate interest and excitment.
Interest and excitement generate buyers.
Buyers generate volatility. Volatility creates opportunities for smart traders to profit.
By opening every email we send, reading all our blogs, and following us on facebook you too will become one of the smart traders.