Trading Pink Sheet Stocks

Just from the title of this hub some may think that I’m somehow against trading pink sheet stocks, but that is actually not the case at all…I’m against trading in a manner that does not represent taking calculated risks, but instead is a “reckless” style of trading that is more akin to gambling than to actual investing. Truth be told, there really is not much difference between Wall Street and the Vegas strip—there’s just as many out-of-control gamblers in both places, but at least with investing in the stock market, you can have a slightly higher probability of coming out a winner than frittering away your hard-earned money playing roulette or the slots. But anyway, when you talk about trading pink sheet stocks, most people immediately recoil and think that you’re talking about some renegade style of trading, but if you know how to mitigate your risk, you can find some serious opportunities for profit. The only disadvantage is, however, that the world of pink sheet stock trading is truly a minefield, and you will many times have to risk getting a limb blown off, so to speak, in order to learn the ropes. Pink sheet stocks themselves are stocks that are not actually traded on any U.S. exchanges, such as the NASDAQ or the NYSE, but rather they’re basically lumped under the category of OTC stocks, which means that they represent companies that either chose not to be listed on one of the major U.S. stock exchanges, or simply could not meet the listing requirements of those various exchanges (and believe me, most pink sheet stocks fall into the latter category). Pink sheet stocks are often criticized because there seems to be much less regulatory oversight for this breed of stocks, and therefore the pink sheet stocks in general stand a much higher chance of being candidates for price manipulation or “pump-and-dump” schemes, where the stock is basically hyped by a group of insiders (who, coincidentally, happen to already own tons of shares of the stock) to artificially drive the price up, and then the insiders (or promoters of the stock) “dump” their shares on an unsuspecting trader who thought he/she was really gonna strike gold with this one, only to watch helplessly as the stock’s price deflates back to a low price—and sometimes even to zero.  

The reason why these stocks are even called “pink sheet stocks” is because back before the digital age, the quotations for these stocks were printed on pink sheets of paper. Everyone knew that the pink sheet stocks were the “Wild Wild West” of the stock trading world, and that basically anything could happen as far as the stocks’ prices were concerned. The same is true today of these stocks. The potential for crappy price fills, horrible liquidity, and almost egregious price manipulation definitely exists, so you have to be ready to assume those risks and realize that they’re all a part of the game. You can’t get mad if one of your pink sheet darlings crashes and burns…that’s simply the nature of the beast. There have been reports that even the Mafia has been involved at times with either creating the so-called “companies” that these stocks are based on, or coercing certain market participants to “pump-and-dump” the stocks for manipulative gains. So although the pink sheet stocks have had a hard time shaking their “seedy” reputation, there are also extravagant profits to be had, but I would be lying if I said that they’re not hard to come by. You really have to have access to a trading platform that will give you the ability to enter and exit these stocks in short order, and truth be told, many online brokerages fall short of this capability. But anyway, trading pink sheet stocks is not a hopeless cause, but I really believe that the best thing you can do is fully understand the type of risks involved before putting any money into them. Okay, it’s way late, I’ve been up almost 24 hours straight, so I’m going to sign off and go to bed.