Pink Sheet Trading

Written by Michael Federico
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Trading pink sheet stocks is one of the most unique opportunities available to investors. It is also one of the riskiest. Pink sheet stocks are usually extremely inexpensive. This low cost is what draws people to them, because there is an opportunity to turn a profit with a minimal investment. However, pink sheets are not subject to the rules and regulations of other stocks, so it makes it very difficult to determine which ones have any real potential.

A pink sheet company does not have to be a reporting company with the SEC. It is not required to file with or report to the SEC. A pink sheet company does not have to inform the public of how many shareholders it has or even how many employees it has. This lack of information does not mean that the companies are not legitimate, but it does mean that there is much greater room for fraud.

Buying and Selling Pink Sheet Stocks

An individual investor cannot trade pink sheet stocks on his own. He must go through a registered broker dealer to make transactions. Once he has contacted the broker dealer, there are several other things that must occur before trading can begin. The broker must inform the investor of the risks involved with pink sheet trading in writing. The investor must then sign paperwork stating that he received and understood the risk statement. Once the paperwork has been reviewed and approved, trading can begin.

There are online brokers that allow their clients to trade pink sheet stocks. Unlike other sites, though, a person will not be able to handle his own transactions. Trading pink sheets would be classified as a broker-assisted trade online, and costs for transactions would most likely reflect that.


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