Learning to Day Trade - Part 15

Dip Buying OTC Morning Panics

OTCs produce these beautiful crashes and bounces that you can take advantage of.

This is part of Tim’s trading strategy and something I have not really witnessed. Thanks to Bitcoin and cryptocurrency hype there has been one really strong OTC stock - $MGTI. I remember this stock from a long time ago since it was originally on the NASDAQ under the ticker $MGT. A ton of Robinhood users were hyping it and buying in 2016. I’m not really sure what happens when they go over to the OTC market since Robinhood does not allow trading of OTCs (I bet the executions would be even more terrible).

This dip buying strategy can also work on listed stocks, but you need to buy around a key support level and preferably has a huge support wall. If it cracks the level 2 support wall, you get out. If not, you sell into strength on the way back up.

For OTCs, you’re basically watching for a huge drop in the first few minutes of the open. You want it to keep making new lows until it finally cannot go any lower and starts to bottom out.

You’re looking for the stock to start turning off the bottom. When you see that happen you need to set your buy order 5c+ above the best ask. That is the only way to get executed. Even with Interactive Brokers I cannot get executed on OTCs if I try to buy on the bid or 1c above. You should get filled below your limit order anyway so it’s not too bad.

When you want to get out you need to sell before it starts to roll over otherwise you might have to go 20c+ below the bid or use a market order. Always try to sell into strength.


Hopefully from these charts you can easily spot when it’s turning around. The first candle to close green after a lot of fat red bars. It’s not always this simple but this same pattern ocurred 3 days in a row on the same stock.

Another thing to watch for is when you start seeing buying on the ask and possibly the bid being pinned above the best ask price. I believe this happens because OTC executions are very slow so the order gets stuck. I’ve seen that happen at least twice and both times I pulled the trigger but didn’t get filled.

If you miss the entry and you had your order 5c+ above the ask then do not chase it. You need to have a good entry in order to get out with as small a loss as possible if it ends up failing and cracks.

$MGTI 1 minute candles

$MGTI 1 minute candles

$MGTI 1 minute candles

$CANN did not have as much volume as $MGTI which is why it’s a little choppy. It’s possible to profit from it but it would have been a lot harder.

$CANN 1 minute candles

Shorting Failed Breakouts / Resistance



Disclaimer

I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.