!!!! !!!!!!!!!!!!!!!!!!!!!!!! !!!!!! OTC Lotto Picks User Guide.

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2 2 OTC Lotto Picks User Guide A Better and More Complete Penny Stock Plan to Mitigate Risk and Realize Bigger ProAits

3 3 Legal Disclaimer This guide is wri,en to provide correct and reliable informa8on with respect to the subject ma,er covered. This book is offered with the understanding that the author is not involved in represen8ng any professional service. Material presented in this guide is only for learning purpose only. If legal advice or other expert help is required, the service of an experienced person should be sought. Copyright 2014 by OTClottopicks.com All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means, including informa8on storage and retrieval systems, without wri,en permission from the publisher or author.

4 Table of Contents Preface... 6 Introduc8on... 6 Why Invest in Penny Stocks?... 7 Penny Stocks Markets... 8 OTCBB Market (Over the Counter Bulle8n Board)... 8 Pink Sheets... 8 AMEX... 8 NASDAQ Capital Market... 9 Key Players in Penny Stock Trading... 9 Investor... 9 The Penny Stock Broker... 9 Online Brokerage The Small- Cap Companies...10 The Stock Exchange...10 THE SEC...10 A Profitable Penny Stock...10 Breaking News Growth Poten8al Sales & Revenue Company Sector Management Transi8on to Larger Markets

5 A Vital Lesson in Momentum Trading Insider Trading Research Rules for Penny Stock Trading Risk Disclosure Document Rela8ng to the Penny Stock Market Broker or Dealer Disclosure of Quota8ons Disclosure of Compensa8on to Brokers or Dealers Compensa8on of Associated person Account Statements for Penny Stock Customers Risks Associated With Penny Stocks Manipula8on Risk Overcharging Substan8al or Immediate Loss Lack of Informa8on Liquidity issues Bullet Point Steps Conclusion

6 6 Preface Welcome to OTC Lo'o Picks. This guide is exactly what you need to be,er understand the penny stock market and learn all the ins and outs of the industry. Whether you are a newbie or seasoned trader this guide should be extremely useful. There are plenty of concepts, terms, and rules to get you headed in the right direc8on. We ll also show you ways to mi8gate risk to get the most out of your trades. Although penny stock trading is risky, the opportunity to make large profits can t be denied. Fasten your seatbelt and get ready for an exci8ng ride Introduction Penny stocks have been popular amongst day traders for some 8me, but have especially picked up steam over the past 15 years. With a heavy fluctua8on in the markets during the dot- com and housing market boom and eventual crash, many investors looked to penny stocks as a way to recoup losses more quickly than slower moving blue chip plays. Investors also use penny stocks to supplement a small por8on of their stock poriolios. The term penny stock generally refers to stocks trading below $5.00, usually outside of the major market exchanges. They will omen trade over the counter through the OTCBB and Pink Sheet markets. Many of the companies are not listed on the TSX or NYSE because they are too small or new and do not meet some requirements for lis8ng.

7 7 What makes penny stocks an a,rac8ve investment is their affordability. Even with the poten8al risks, many believe that penny stocks offer the greatest poten8al return on your short or long- term investment. Because you are able to buy these stocks at such a low price there is poten8al to make massive gains in a very short 8me frame. These types of stocks are generally considered to be highly specula8ve and high risk. Where a penny stock can quickly move up 25%, the worst can also happen as a penny stock can just as quickly lose 25% of its value. The bo,om- line is that your chances of earning money are as high as losing money. You just need to be smart and hopefully this guide sets you on the right path. Why Invest in Penny Stocks? With so much risk, why would anyone consider inves<ng in penny stocks? It s pre'y simple. Without great risk there are no great rewards, and at the right price penny stocks are a'rac<ve plays. Ask yourself, how oeen does a blue chip company like Coca Cola or General Electric go up over 200% or more in a few trading days? Never. Penny Stocks have enough vola<lity to go up as high as 500% in a ma'er of days. In our opinion (even weighing the risks), penny stocks offer the greatest chance of making a lot of money in a very short amount of <me. Knowing when to get in early enough and which penny stocks to choose from can be the challenging part.

8 8 Penny Stock s Markets Here is a brief breakdown of what markets penny stocks are traded in: OTCBB Market (Over the Counter Bulle4n Board) Investopedia defines OTCBB as A regulated electronic trading service offered by the Na8onal Associa8on of Securi8es Dealers (NASD) that shows real- 8me quotes, last- sale prices and volume informa8on for over- the- counter (OTC) equity securi8es. Any equity that is not traded on the NASDAQ exchange is 10 / Penny Stocks Markets OTC equity. This market is compara8vely safe from other equity markets and it s opera8ons are approved by SEC. Pink Sheets The Pink Sheets is an electronic quota8on system that daily lists the bid and asks prices for OTC stocks. Unlike the NASDAQ or AMEX, it s just a quota8on service provider that works without any repor8ng requirements or regula8on. Most pink sheet picks trade at sub- penny levels or just a few cents. Though trading through the Pink Sheets is a bit risky, with such low price points, this is where the poten8al triple digit gains can be made. AMEX The American Stock Exchange (AMEX) is an excellent plaiorm for trading penny stocks. Even though shares traded here may have less volume than

9 9 shares on the NASDAQ, AMEX companies are required to report certain requirements that are followed by more news and quote service es. NASDAQ Capital Market: If you re looking for the safe and the best place to trade penny stocks, then NASDAQ Capital Market is a best place to do so. Companies that operate in this market strictly follow the repor8ng standards while maintaining their list. This prac8ce enables investors to get ongoing financial returns and reports. NASDAQ stocks usually have more consistent trading and hold value a bit longer. Key Players in Penny Stock Trading It s important to understand the flow of penny stock trading and which persons and en<<es make up the trading cycle. The main objec<ve for all par<es involved (excluding the SEC) is to make money. 1. Investor As an investor, you are the most important player in penny stock trading, as you re the source of any money coming in. You re the one who ll provide the investment to earn a profit. 2a. The Penny Stock Broker How will you perform any transac8ons if a stockbroker won t help you? Stockbrokers play a pivotal role as they have the tendency to influence stocks. They earn commission on the profit, which you earn on the stock. However, to be on the safe side, a penny stockbroker also charges fees for providing investment consulta8ons to his clients.

10 10 2b. Online Brokerage The most popular way to trade penny stocks is through an online brokerage account. We recommend Zecco, Share Builder, TD Ameritrade, Interac8ve Brokers, or Sco,rade. 3. The Small- Cap Companies The Small- Cap companies are the ones in which you invest your money. Usually these companies are newly established companies, those trying to expand their business, or trying to reemerge from bankruptcy. No ma,er what the reason is, these en88es make you earn enormous profits as they adopt high- risk strategy to earn high profit. 4. The Stock Exchange This is the plaiorm to buy and sell shares at. All stockbrokers are gathered in the trading floor where trading takes place every business day. 5. The SEC The Security and Exchange Commission (SEC) is responsible for maintaining order and discipline in penny stock trading. It formulates and then implements regula8ons and guidelines. It also imposes penal8es on breaching regula8ons. A ProAitable Penny Stock With so many investors around the world profi<ng big from penny stock picks, what are the factors that make a penny stock a good buy and poten<al moneymaker? While nothing is guaranteed, the following indicators should provide you with a list of Company health checks to look for and iden<fy: Breaking News

11 With most penny stocks being companies that are starts- up or have li,le to no history, investors must pay close a,en8on to breaking news on the companies they are interested inves8ng in. The key to gesng media exposure lies on how effec8vely a company runs its PR campaign. An efficient PR team is a must for a company to promote its products. Any announcement is typically an important revenue- building announcement, such as a new product development, large sale, or new distribu8on signing. Marke8ng efforts are usually a,ached to a new PR campaign and this can signal a shim in the company looking to increase shareholder interest. A brand new PR story will tend to a,ract investors, which can create volume spikes sesng up a poten8al run. Growth Poten4al Innova8on is a key component of penny stock poten8al. A penny stock company can garner the na8on s a,en8on by introducing an innova8ve product into the market. In the past, we have seen various companies that emerged from nowhere, and their stock enjoyed 3- digit or even 4- digit growth. For example, when JB Oxford introduced a revolu8onary trading pa,ern, its stock experienced an unprecedented growth of 6000% in just three months. As a result, those who had invested $1000 in JB Oxford had $60,000 in their bank account aoer 3 months. There can also be a lot of over- reac8ons in a stock amer less than expected earnings, or a seasonal shim in demand. Is the stock trading at a historic low 11

12 12 price, because of some wrong corporate decisions, government regula8ons, lawsuits, etc? Amer a dispropor8onate sell- off many 8mes a stock will eventually rebound, giving new investors a great bargain on their investment dollar. Take advantage of these dips on stocks that are undervalued. Learning to sense the right 8me to swoop in and gobble up these growth poten8al stocks is a skill that can be learned. Sales & Revenue Penny stocks are unique compared to larger market plays primarily because of the differing expecta8ons given to sales and revenue data. With the DOW and most blue chip plays, if revenue is down or earnings are less than forecasted that can have a drama8c impact on the stock price. With penny stocks plays (par8cularly in the OTC and pick sheet markets) many 8mes the company may not even have sales or revenue numbers, and that may not even affect the stock price. Why? Investors understand that these start ups may have just go,en through the development stage and are only now ready to go to market. The risks associated with unknown penny stocks are lessened by the low- priced buy- ins and the revenue poten8al of a new company can be very exci8ng. We s8ll want you to pay a,en8on to financials. We just wanted to point out that sales and revenue numbers may not always be as important with penny stocks as they certainly are in the larger, more regulated stock markets. Of course, financial history is s8ll a great indicator and something we look for when aler8ng members of new pick ideas.

13 Cash Flow Statement In the regular markets a cash flow statement tells you a lot about a company s current financial posi8on. Do check all the segments of a cash flow. If the company is not genera8ng cash from opera8ng ac8vi8es, then there is some problem with the company. Always avoid inves8ng in a company, which has a nega8ve cash flow, par8cularly in its opera8ng ac8vi8es. Company Sector If the penny stock you are considering buying into is part of a hot industry (like gold or renewable energy) the likelihood that the stock will a,ract more investors, thus pushing the price up is greater. Unproven companies within a proven industry provides a built- in story and many 8mes investors get excited about the hype and poten8al for the next breakout stock. On the flip side, let s say you are reading a press release about the next hot pizza chain and are considering inves8ng. This may not be the greatest investment. If you ve done your homework you know that analysts aren t typically bi8ng at the chomp for pizza plays. Even with a massive amount of press some8mes a stock just wont perform well because it s in a sector that most investors care li,le about. You ll also want to avoid companies that could poten8ally be affected by nega8ve events within the same industry. For instance, an insurance house declares a quarterly loss, which people start associa8ng their insurance 13

14 14 stock with that event and start selling off their stocks in a rush. With sub penny plays you probably wont have this problem, but be weary of NASDAQ or AMEX penny stocks, which trade regularly and could have nega8ve associa8ons. Of course, a posi8ve associa8on could be a factor as well. As a student of penny stock trading, you ll want to learn how to see through the hype in some instances, and focus on staple sectors or industries that are trending upward. Management The success of any company begins at the top. Do your research and find out if the execu8ve team and board have the drive and aggression to take a new company from start- up to profitability? Does the leadership have clearly defined goals? What are their qualifica8ons and background? Lets say that the CEO of the company you are interested inves8ng in has previously taken a start- up and turned them into a $100 million company, this would of course give you greater investor confidence to purchase stock in that new company. On the other hand, if you find that management is not well equipped and has failed to live up to expecta8ons in the past and doesn t look good once again that could be a serious red flag. It s also important to look at the board as well and find out if the experience lines up with the new company. For instance, if I am considering purchasing X amount of shares in a new Pharmaceu8cal company, and have discovered that a figure head from Pfizer is sisng on the board, that s a posi8ve signal

15 15 that this new Company could be a great investment. It s a good idea to look at all the Insiders and find out if there are any a,rac8ve, major shareholders. Transi'on to Large Markets Transi8on to large markets is another great situa8on, which you should be looking for. Almost every small company dreams of being listed in a larger market. There are a couple of reasons for which an OTC stock works hard to get listed in the major markets. First, mutual funds cannot buy stocks of a bulle8n board company. Secondly, brokers do not recommend their clients to purchase penny stocks. However, once a company is listed on NASDAQ or other major markets, brokers can recommend its shares to their clients. Furthermore, if a mutual fund buys stocks of a small- cap company, it is enough to increase the price of the smallest NASDAQ Company. The requirement for a company to get listed on NASDAQ is strict. As a result, very few companies are able to sa8sfy requirements like stock prices and revenues. However, once, they do it, their values double or triple in no 8me. Therefore, always look for companies that are about to make a transi8on towards big markets. A Vital Lesson in Momentum Trading You cannot step into penny stock trading without understanding momentum trading. So much of the ac<on and profit poten<al is made rapidly and if

16 16 you don t know how to react quickly you ll either miss out on profits or lose money, which none of us want. In momentum trading, traders keep a close eye on the stock and instantly purchase it when its price goes up. Traders make a profit by tracking the quick changes in stocks prices. This situa8on is quite common with penny stocks in comparison to other stocks. This situa8on happens when the demand of a share is low, thus resul8ng in a lower price. Let s suppose that 2000 investors informing them of a change receive an . Consequently, these investors will rush towards buying those shares. This will definitely make a remarkable impact on the price of that stock. The rising demand of that share will not be able to meet the current supply of stocks, thus market makers will be forced to increase the price of that stock. This situa8on will convince buyers to believe that the price is headed higher. We ve experienced stocks rising from.03 to.25 in just a few hours. However, they later fall back to.08 when sales started. Your response must be quick to make a profit from momentum trading. In momentum trading, prices change rapidly. Therefore, using a limit order is not a bad op8on at all. Some people make the mistake of chasing prices. That s not a wise ploy, because if you catch the price at the end, you ll lose your money once the price declines. Momentum trading is risky and only very few investors make money from it. However, if you re disciplined and not greedy, then your chances of earning profits are higher. The following

17 17 are a few 8ps to be considered while involving in momentum trading: Decide on the price with which you re willing to pay and then s8ck to it. Immediately place you next trade once you receive the confirma8on message of your purchase. Your trade should be followed by a limit sell. Never hold your shares for too long. It may be temp8ng to earn more profit, however you need to be more disciplined by selling your shares amer a few minutes of purchasing. Follow these 4ps and you ll be able to earn small but decent gains. Always remember that it s bexer to have made some profits than nothing at all. Insider Trading Insiders are chief officers, execu8ves, and directors that hold per8nent informa8on (acquisi<on, partnership, or revenue news) that the general public doesn t have access to. Many 8mes these Insiders will take early posi8ons knowing very well that their Company stock could breakout within 1-2 months. The phrase insider trading has a nega8ve connota8on, but in fact insider trading is completely legal. The illegal kind of insider trading (the Martha Stewart kind) you are probably familiar with is when investors profit off of

18 18 undisclosed insider informa8on. The great news is that insiders are required to disclose insider trading to the SEC within a specified 8me frame. As investors rely on informa8on released by these insiders, you will have an added advantage if you have access to the inside informa8on of a company. You can react more quickly than anyone present outside the company. Insiders have a knack for acquiring large amounts of their Company stock, ahead of major announcements. When an execu8ve adds a significant por8on of their personal fortune into their Company holdings, there is greater reason to believe that the stock is about to make a big move. Trades made by a CEO, CFO, CIO, or any other C- Level execu8ve should be more closely monitored. These hands- on insiders are more prone to know the inner workings of their Company. Major financial or growth announcements usually follow significant trading ac8vity. This of course causes the stock price to increase. You don t have to be an insider to profit off of these Company trades. You simply need a way to track these insider filings. We recommend using a service called SEC Form 4. They provide the most up- to- date feeds and daily updates to maximize stock trading profits. Research Leaders do not follow others, but instead make their own decisions. Though it s not necessary for a leader to know everything, he or she should know the art of obtaining the necessary informa8on. There is a level of 8me and effort needed to become be,er at knowing what trades are good

19 19 ones and how to trade penny stocks more effec8vely. Never follow any medium blindly. No ma,er what informa8on our service provides on a par8cular company stock, it is necessary that you develop strong research skills. It is never a good idea to depend wholly on other people s advice. Use Penny Pick Finder, use message boards, use marke8ng data, company comparisons, sector trends, and so on. The goal is to refine your research skills. Hopefully you are gaining be,er insight through the use of this guide. Rules for Penny Stock Trading Though trading in penny stock is a bit risky, SEC has implemented proper legisla8on to protect penny stock investors who are interested in penny stock trading. Given below is more detailed informa8on regarding the rules of penny stock trading: Risk Disclosure Document Rela4ng to the Penny Stock Market A firm must sign a wri,en agreement with the customer before selling penny stocks. Besides, the firm prior to the transac8on should also approve customers. If a dealer is found of breaching the law, the transac8on shall be considered unlawful. SEC also binds firms to communicate all the risks associated with penny stock trading to the customer. Broker or Dealer Disclosure of Quota4ons The transac8on shall be considered unlawful if the firm does not

20 20 communicate the current market quota8on for a penny stock. Disclosure of Compensa4on to Brokers or Dealers The transac8on shall be considered unlawful if the firm does not communicate the commission, which the company and its broker will receive. Compensa4on of Associated person The transac8on shall not be considered legal unless compensa8on has already been received or shall be received by any associated person of a dealer or brokers who have been involved in the transac8on. Account Statements for Penny Stock Customers A monthly account statement that shows the market value of penny stocks in the customer s account should be sent to the customer. However, if a dealer or a broker has not been involved in the past 6 month, he will not be accountable for sesng those tasks. If there is any specific value men8oned in the statement, then you should keep in mind that this price might have been calculated on a limited number of transac8ons. And there is a possibility that you may not be able to sell your stocks at this price. These are the rules and regula<ons that the SEC has put in place for brokers and firms to make sure of the safety of investors money. Risks associated with Penny Stocks We ve talked about the various risks associated with penny stocks. But we ve also talked about the possibility of high returns as well. This is the a,rac8on of penny picks. However, there are some issues that need to be

21 21 considered before making any final decision about inves8ng in a penny stock company. Some of those risks are defined below and should always be considered: Manipula4on Risk When considering an investment in penny stocks, you must keep in mind that a sole broker or a small group of firms trades a majority of the stocks. This condi8on makes it easy for the prices of stocks to be manipulated. For example, a brokerage firm can purchase stocks at low price. Amer that, it can raise its price by crea8ng an ar8ficial demand for the stock. Price in this case is increased by manipula8on because the price at this level does not reflect the actual value of the company, but, if an investor purchases this stock as a result of aggressive marke8ng, he may incur a loss when the price collapses. Overcharging Unlike trading in other shares, brokerage firms do not earn commission in penny stock trading. Instead, they charge an undisclosed amount of mark- ups over the price that the firm pays for a stock. Charging mark- ups is illegal, but different brokerage firms are s8ll charging around 100% mark- ups above the stock s price. Substan4al or Immediate Loss In penny stock trading, the rim between the ask price and bid price is usually large. In case you didn t know, the ask price is the price at which an investor purchases a stock from the brokerage firm, whereas the bid price is

22 22 the price at which an investor sells his stock to a brokerage firm. On most occasions, an investor incurs a paper loss by the 8me the stock is purchased. Let s suppose a stock s ask price is 5 cents and the bid price is 2.5 cents. In that case, an investor will suffer a loss of 50%. Even for the break- even condi8on, the investor will require a hundred percent increase in the bid price. Lack of Informa4on Unlike large companies, a number of penny stock companies do not publicize their quarterly or annual reports. Thus, an investor knows very few things about the financials and the opera8ng history of the company. This lack of knowledge increases the risk for investors for selec8ng the wrong stocks. Such a situa8on makes it difficult for investors to find out whether the price of a stock reflects the real value of the company or whether it is a result of aggressive marke8ng or not. Liquidity issues Many penny stock companies do not encourage their investors to sell their stock against cash. In most cases, brokers disappear from the screen when an investor a,empts to approach them to sell share. In some cases, the brokerage firm imposes a condi8on for the investor to buy a stock from another company which that firm markets.

23 23 Here is a tablature of some of the techniques discussed that you can use to help turn your investments more proaitable: 1. Always look for the board of directors that run the company s affairs. 2. Carefully analyze the companies, which are trying to come out from a turn- around situation. 3. The stock price of a penny stock company that is going to launch a new product can increase signilicantly. 4. Pink Sheet stocks that are going to be listed on the OTCBB can become a prolitable option. 6. Being an insider of a penny stock company increases your chances to make money. 7. Research, prior to investing, the size of a company, suppliers, competitors, customers, and Linancials is must. 5. A prompt and wise reaction is required to make the most of momentum trading. Conclusion You have probably discovered that penny stocks are both highly risky, but possess high profit poten8al. The goal of this guide is to provide all investors with tools to make be,er trades and techniques to mi8gate risk. We always recommend that you never invest into a stock unless you can afford to lose your en8re investment. Because of the vola8lity of penny stocks you d be best to start off with a lower investment.

24 With close examina'on of penny stock picks and pu;ng into prac'ce the aforemen'oned lessons you are well on your way to becoming a successful penny stock investor Legal Disclaimer The opinions expressed about the stocks and markets in this e-book or through our services are purely the result of independent research conducted by our staff and are not offers or solicitations to buy or sell the securities mentioned. Otclottopicks.com ( Site") is engaged in the business of marketing and advertising companies. All content in this communication is for informational and entertainment purposes only. Neither the owner of the site, nor other business associates are licensed broker-dealers, account representatives, market makers, investment bankers, investment advisors, analysts or underwriters. Opinions of Otclottopicks.com should not be interpreted as investment advice, as an endorsement of any security, or as an offer to buy or sell any security. We are a publicly available service that provides general, disinterested information. 24

25 The trading of securities may not be suitable for all potential users of Otclottopicks.com. You should be aware of the inherent risks in the stock market. Past performance does not guarantee or imply future success. You cannot assume that profits or gains will be realized or that any strategy discussed in this packet. The purchase of securities discussed by this guide or otclottopicks.com or newsletters of otclottopicks.com may result in the loss of some or all of any investment made. This guide is written to provide correct and reliable information with respect to the subject matter covered. All information provided by this Stock Guide is obtained from sources believed to be accurate and reliable. However, there may be some inaccuracies in such information. We do not warrant the accuracy of the information available through this Penny Stock Guide. This book is offered with the understanding that the author is not involved in representing any professional service. Material presented in this guide is only for informational or entertainment purposes only. If legal advice or other expert help is required, the service of an experienced person should be sought. We recommend that you consult a stockbroker or financial advisor before buying or selling securities, or making any investment decisions. You assume the entire cost and risk of any investing and/or trading you choose to undertake. This disclaimer may change from time to time without notice. 25