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OTC (over-the-counter)

Trading that happens through dealer networks rather than on a major exchange.

Market BasicsBeginner

Definition

OTC securities are not listed on exchanges such as the NYSE or Nasdaq. Many OTC companies have lighter disclosure requirements and thinner trading, so prices can be harder to trust and exits harder to execute.

Watch out for

Wide spreads, low volume and limited information make OTC stocks higher risk, and fraud such as pump-and-dump schemes is more common there.

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