If you are looking to learn how to buy over the counter stocks then chances are you are interested in the penny stock market.
Penny stocks are not traded on the stock exchange like conventional stocks, they are traded in the over the counter or OTC market.
The trading of such stock an agent will act on behalf of the investor to arrange a transaction between the investor and a third party, the broker receives a commission for his part in the deal.
There is no specific definition for a penny stock but the general way to classify what makes a penny stock is a stock that trades at under $5.
Penny stocks may also be known as a nano or micro stock.
For a broader definition of a penny stock we can say that the penny stock refers to a businesses aggregate value of the outstanding common shares and are more commonly known as the shares market cap rather than the stock price.
To be able to work out the market cap of a company you must first multiply the companies current stock price by the number of shares that are currently outstanding.
This calculation will give you the total dollar value of all the shares in the company at any given time.
This is all important information for people who are learning how to buy over the counter stocks.
It is important to realise that the vast majority of penny stocks are charged by brokers as a simple, principal transaction.
This means that the broker does not charge any commission on the trade and instead, make their money on the spread and also from buying and selling at good times.
When learning how to buy over the counter stocks and, more specifically penny stocks it is important to know that there is no set price at which penny stocks are bought and sold.
Instead there are a number of different prices.
The spread of most penny stocks tends to be around 25-33% or so but has been known to go as high as 50 to even 100%.
In addition to this there are always two bid and two ask prices, these are known as the inside bid, outside bid, inside ask, and outside ask.
The outside bid and outside ask are the numbers that are of most importance.
When learning how to buy over the counter stocks it can seem quite complicated at first and with penny stocks the losses are often vast.
However, many investors trade in them every day.
It makes good sense to consult with your broker on what stocks are the best investment, but please do try to be wary of brokerages who may not have your best interests in mind.