Listed or OTC Stocks: Key Takeaways
- Which reigns superior — listed or OTC stocks? Matt and Kyle face off!
- See the biggest pros and cons of each so you can decide which best suits your trading style…
- And see which stocks offer the most potential for a small account…
Which is better — listed or OTC stocks? The short answer: it depends. To help you answer which is better for YOUR strategy, millionaire traders and Trading Challenge moderators Kyle Williams and Matthew Monaco weigh in.
Read on to learn the key differences in listed and OTC stocks straight from Matt and Kyle!
Table of Contents
OTC and Listed Stocks: What’s the Difference?
Hey, Matt here.
Today, Kyle and I break down the differences between OTC and listed stocks. We’ll also go over some pros and cons for each type of stock.
But before we get into any of that, let’s cover some basics. Listed stocks trade on one of three exchanges:
- New York Stock Exchange (NYSE)
- American Stock Exchange (AMEX)
- Pink sheets
Since I trade both OTCs and listed stocks, I’ll cover listed stocks. Kyle’s primarily an OTC trader, so he’ll dig into what you should know about OTCs.
Listed Stocks: Pros and Cons
- Pro: Commission-Free Trading. Most brokers offer commission-free trading for listed stocks. That’s great if you have a small account. You don’t have to worry about fees eating into your potential profits.
- Pro: Liquidity. Listed stocks trade high volume. That means you can enter and exit trades easily. And you can get filled almost instantly — even with a limit order.
- Con: After-Hours Trading. This isn’t always a bad thing. It depends on your strategy. Some traders love to trade in premarket and after hours. But if you hold a listed stock overnight, there are risks. The company could do an offering. You don’t want to get caught in that situation.
OTC Stocks: The Good and the Bad
Kyle here. I’m mostly an OTC trader. I usually trade OTCs about 80% of the time and listed about 20%. But when the OTC market slows down, it evens out to about 50/50.
- Good: They’re Easier for New Traders. OTCs move slower than listed stocks. I think that makes it easier to read price action. Listed stocks can move FAST and overwhelm new traders. OTCs aren’t as choppy as listed stocks. They trade smoother and have cleaner charts. They’re also lower-priced, which is great for small accounts.
- Good: No After-Hours Trading. I live on the West Coast so the market opens at 6:30 a.m. I’d have to get up at 3:30 or 4:30 a.m. to watch premarket. No thanks. And by the time the market closes, I’m done. If I hold an OTC overnight, I don’t have to think about it until the market opens the next day.
- Bad: Hard to Fill Orders. Again, OTCs don’t have the same liquidity as listed stocks. That means it can be harder to get your order filled — VERY frustrating.
- Bad: Not Great for Stop Losses. Harder to fill orders also means your stop loss might not get executed. I use mental stops, so it’s not a huge deal for me. It really depends on how closely you can watch the market.
Listed vs. OTC Stocks: What’s Right for You?
Traders like Matt and me often learn to trade both, even if we have a strong preference. Sometimes listed and OTCs stocks run hot at the same time. Other times they shift back and forth. It all depends on the sector and overall market momentum.
Find what works best for you.
What do you prefer — listed or OTC stocks? Let us know in the comments!