Where to Buy OTC Stocks: An Investor’s Guide

OTC stocks can offer huge trading opportunities, but most traders don’t know where to buy them. These stocks don’t trade on major exchanges like the Nasdaq or NYSE, so you need to use a brokerage that provides access to the OTC market. Not all brokers offer the same availability, and some charge extra fees for OTC transactions. If you don’t know what you’re doing, you could end up overpaying or struggling to execute trades.

Read this article to learn about good OTC brokers, understand why *never* to invest in these sketchy stocks, and navigate the OTC markets with confidence!

I’ll answer the following questions:

1. What are OTC stocks, and how do they differ from exchange-listed stocks?
2. Why do investors trade OTC stocks instead of traditional stocks?
3. Which brokers allow you to buy and sell OTC stocks?
4. How do you buy OTC stocks step by step?
5. What are the different OTC market tiers, and what do they mean?
6. What are the biggest risks of trading OTC stocks?
7. What are the advantages of trading OTC stocks?
8. How can you minimize risk when investing in OTC stocks?

Let’s get to the content!

What Are OTC Stocks?

OTC stocks are securities that trade outside of major stock exchanges. Instead of being listed on the Nasdaq or NYSE, these stocks trade through broker-dealer networks in the OTC market. Companies that trade over-the-counter usually have fewer reporting requirements, lower liquidity, and higher risks compared to exchange-listed stocks.

Many OTC stocks are penny stocks, meaning they trade for under $5 per share. These stocks can experience extreme price swings, sometimes gaining or losing 50% or more in a single day. That’s why I never “invest” in penny stocks—I trade them. Their volatility creates short-term trading opportunities, but holding them long-term is dangerous.

Most traders don’t understand the risks of OTC stocks. Just because a company has a real product doesn’t mean it’s a good investment. I’ve seen countless penny stocks with exciting press releases that eventually drop 90% or more. If you’re going to trade these stocks, focus on price action, volume, and liquidity—not the company’s story.

Why Invest in Over-the-Counter Stocks?

Some traders think OTC stocks offer opportunities that can’t be found in the regular stock market. They see them as a way to get in early on small companies before they grow. But the truth is, most OTC companies never go anywhere. They lack financial transparency, have questionable business models, and many eventually fail.

That’s why I trade OTC stocks instead of investing in them. The only reason to trade them is the volatility—these stocks can spike 100% or more in a day. If you know how to spot the right setups, you can take advantage of short-term price movements and lock in gains. But you need a strict trading plan. Without one, you’re gambling.

If you’re trading OTC stocks, don’t fall for the hype. A company might sound promising, but press releases mean nothing if there’s no liquidity or real price movement. Stick to the setups that work—first green days, morning panics, and breakouts. That’s how I’ve made millions trading penny stocks, and that’s how I teach my students to trade them.

OTC stocks move fast, which is why watchlists are important. If you’re looking for stocks that could actually move, check out this list of the best OTC stocks.

Best OTC Brokers to Consider Buying From

Choosing the right broker for OTC trading is just as important as selecting the right stocks. Some brokers restrict access to OTC markets, while others charge high fees or offer slow executions. The best brokers provide fast order execution, transparent pricing, and access to crucial tools like Level 2 data.

Not all brokers let you trade OTC stocks. Platforms like Webull and Robinhood don’t offer OTC trading, which limits access to thousands of stocks. If you’re serious about trading OTC stocks, you need a broker that actually supports these markets. Webull does have some strengths—if you’re thinking about using it for other types of trading, here’s what you need to know about its safety and features.

I’ve traded with many brokers over the years, and I always recommend finding the one that “sucks the least” for your specific needs. Some platforms have better executions, while others provide more research tools. If you’re trading OTC stocks, you need a broker that supports these trades without unnecessary restrictions. Below are some of the best brokers for OTC trading and why they matter.

1. StocksToTrade

StocksToTrade isn’t a broker, but it’s one of the most powerful tools you can use for OTC trading. I helped develop it specifically for traders looking for volatility and momentum in penny stocks. It provides real-time scans, Level 2 information, and news alerts—all critical for spotting the best setups.

Most OTC stocks move fast, and if you’re relying on delayed quotes, you’re already behind. If you’re serious about trading OTC stocks, you need a tool that gives you an edge in spotting breakouts and morning panics.

When it comes to trading platforms, StocksToTrade is first on my list. It’s a powerful trading platform that integrates with most major brokers. I helped to design it, which means it has all the trading indicators, news sources, and stock screening capabilities that traders like me look for in a platform.

I use StocksToTrade to scan for news, tweets, earning reports, and more — all covered in its powerful news scanner. It also has a selection of add-on alerts services, so you can stay ahead of the curve.

Grab your 14-day StocksToTrade trial today — it’s only $7!

2. TradeStation

TradeStation is a solid broker for OTC trading, offering fast executions and advanced charting tools. The platform is built for active traders and includes direct market access, which can help you get better fills on your trades. It has two main account types—TSgo and TS Select. TSgo has no minimum balance, while TS Select requires $2,000 to start.

One downside of TradeStation is its fee structure. While it offers commission-free trading on listed stocks, it does charge fees for OTC trades. Make sure to check the costs before placing your orders, especially if you’re trading frequently. That said, if you need a powerful trading platform with advanced order routing, TradeStation is worth considering.

3. Charles Schwab

Schwab absorbed TD Ameritrade in 2020, bringing the popular thinkorswim platform under its umbrella. The good news is that Schwab allows OTC trading, and its platform offers solid research tools, including technical indicators and fundamental data.

However, there’s a catch—OTC trades may come with restrictions. Some are intended to help you, like when it froze trading in the scammy stock CLEU. The basic platform also delays stock data by 15 minutes, which is a huge drawback when timing matters. If you’re a long-biased trader and mainly focus on listed stocks, Schwab can be a good choice. But for fast-paced OTC trading, other brokers may be better.

4. Fidelity

Fidelity stands out for one key reason: it doesn’t accept payment for order flow on stocks. That means it routes trades directly to market makers instead of selling your order flow to the highest bidder. For OTC traders, that can mean slightly better fills compared to brokers that profit from routing trades to specific exchanges.

The downside? Fidelity has restrictions on some OTC securities, and not all penny stocks are available to trade. If a stock is too illiquid or lacks proper disclosures, Fidelity may not allow you to buy it. Make sure the stocks you want to trade are accessible before opening an account.

5. E-Trade

E-Trade has been around for decades, and it’s where I placed some of my earliest trades. The Power E-Trade platform is its most advanced option, offering better charting and execution tools than its standard app.

While E-Trade supports OTC trading, it charges commissions on these trades, typically ranging from $4.95 to $6.95. That’s not ideal, but if you’re looking for a reliable broker with strong execution and a long track record, E-Trade is a solid option. Just be aware that it limits purchases of certain OTC stocks, so always check availability before placing an order.

How to Buy OTC Stocks

Buying OTC stocks works differently than buying stocks on a major exchange. Liquidity is often low, meaning that large orders can impact the stock’s price. Traders should use limit orders to control entry prices and avoid market orders that could result in paying too much.

Before placing an order, check the stock’s volume and bid-ask spread. Some OTC stocks have wide spreads, meaning the buying and selling prices are far apart. This can lead to immediate losses if you’re not careful.

Once you place your order, be patient. OTC stocks don’t always execute as quickly as exchange-listed stocks. If your order isn’t filling, don’t chase the stock. Stick to your trading plan and avoid emotional decisions.

What Are OTC Markets?

OTC stocks trade on different market tiers based on their level of financial disclosure and reporting. The three main categories are OTCQX, OTCQB, and Pink Sheets. Each has different requirements for listing, and understanding these distinctions can help traders manage risk.

OTCQX

OTCQX is the highest tier of the OTC market. Companies on this list meet stricter financial and disclosure requirements. These stocks are usually more stable than lower-tier OTC stocks, but they don’t offer the same explosive volatility that penny stock traders look for.

OTCQB

OTCQB is a mid-tier OTC market for companies that meet minimal financial standards. Stocks here are riskier than those on OTCQX, but they still have to provide regular financial reports. Some penny stocks trade on the OTCQB, but liquidity can be an issue.

Pink Sheets

Pink Sheets stocks have the fewest requirements. Many of them don’t file financial reports, making them extremely risky. These are the stocks that can spike or crash within minutes, and they’re the ones I focus on trading. If you don’t know what you’re doing, you can get stuck in a stock that drops 50% or more in a single day.

Benefits of OTC Trading

The biggest advantage of OTC trading is the potential for massive price swings. Penny stocks can gain 100% or more in a day, creating short-term trading opportunities. These stocks move based on hype, volume, and momentum, not long-term fundamentals.

Another benefit is that OTC stocks aren’t heavily influenced by institutional investors. Most hedge funds and big banks avoid these stocks, meaning that retail traders have an opportunity to profit from predictable patterns.

Risks of OTC Trading

The biggest risk with OTC stocks is liquidity. If a stock doesn’t have enough volume, you might not be able to exit your position without causing the price to drop. That’s why I always trade liquid stocks with strong momentum.

Another major risk is company transparency. Many OTC stocks lack real financial disclosures, and some are outright scams. Just because a stock has a great story doesn’t mean it’s worth trading. Stick to price action and proven setups, not hype.

Tips for Safely Investing in OTC Stocks

The best way to stay safe with OTC stocks is to trade them, not invest in them. These stocks are not long-term holds. They’re meant to be traded based on price momentum and volatility.

Always use limit orders to control your entry price. Market orders can lead to bad fills, especially in stocks with low liquidity. Also, never risk too much on any single trade—position sizing is key to long-term success.

Business Development Companies (BDCs) can offer exposure to OTC stocks and private lending markets, making them an alternative for investors. If you’re considering different ways to approach OTC investing, here’s a list of the best BDC stocks.

Key Takeaways

• OTC stocks trade outside of major exchanges and are highly volatile.
• The best brokers for OTC trading offer low commissions and fast execution.
• Liquidity and price action matter more than company fundamentals.
• Most OTC stocks fail long-term, so they should be traded, not invested in.
• Always use limit orders and have a clear exit plan before entering a trade.

This is a market tailor-made for traders who are prepared. OTC penny stocks thrive on volatility, but it’s up to you to capitalize on it. Stick to your plan, manage your risk, and don’t let FOMO drive your decisions.

These opportunities are fast and unpredictable, but with the right strategy, you can make them work for you.

I recommend that you pay close attention in this possibly historic bull market.

If you want to know what I’m looking for—check out my free webinar here!

Frequently Asked Questions

Can You Buy OTC Stocks Through Major Brokerage Platforms?

Some brokerages allow OTC trading, but not all offer full access. Platforms like Fidelity and Charles Schwab support OTC stocks, but they may restrict certain securities. Before opening an account, check the broker’s policies on OTC trading to avoid surprises.

What Are the Fees Associated With Buying OTC Stocks?

Fees vary by broker, and some charge extra for OTC trades. You might pay commissions per trade or higher spreads due to lower liquidity. Reading articles and reviews about different trading platforms can help you find the best option for keeping costs low.

Are OTC Stocks Available in Retirement Accounts Like IRAs?

Most retirement accounts don’t allow OTC stocks because they’re too risky. A financial advisor would likely recommend safer products for a long-term portfolio. Beginners should focus on building a solid strategy before considering OTC trading.

How Can Beginners Learn More About Trading OTC Stocks?

The best way to learn is through research, online resources, and studying real market analysis. Many educational platforms provide content on OTC stocks, including articles and strategy breakdowns. Focus on gaining experience before risking real money.