What's OTC

　　OTC

OTC means "Over-The-Counter" Over-The-Counter (OTC )refers to an on-line transaction traded between banks, brokers and clients via Internet. When comparing this service with that in the traditional market, OTC is completed in a quicker and more reliable way in terms of trading time and settlement. It allows two-ways orders - buying /selling. OTC becomes one of the most popular investment vehicles and a definite component for risk management of banks and brokers.

　　CFD

Contract for Difference (CFD) refers to a contract of a particular commodity, with settlement based only on the price difference but without physical delivery of the concerned commodity. Unlike the futures/Indices trading, there is no clearing and settlement restriction. Therefore, it is also called spot futures. Theoretically speaking, CFD contracts can be found in all goods which have price fluctuation. Nowadays, the most popular CFD contracts are International indices or future, European and American stocks, Forex, grain, precious metals, bonds and commercial instruments etc.

　　Margin

Most of the CFD transactions are conducted under a margin deposit system. Each commodity has its minimum trading unit (lot). For example, the minimum trading unit of gold is 100 ounces a lot, which is around USD37,000.

Banks and dealers provide their client a credit facility to invest, e.g., 90% of the trading amount. In other word, the client is only required to pay 10% capital to invest on a commodity. This 10% Capital is called Margin.

In the margin deposit system, the profit and loss on this 10% capital is same as the full amount. With the same amount of fund, you can trade 10 times more. Thus, it is more flexible in using the funds and control investment. This margin operation is also called "Leverage". You can make big profit by using a small capital investment.

　　Online Trade

Online trade is a growing trend globally. Investor can trade directly with the dealer through online system using his/her personal computer. This can reduce the use of telephone or broker. Online trade has many advantages over conventional method. Obviously, it is operated in a fair and efficient manner. It also provides real time market information such as Bid/Ask prices, buy/sell orders, news, charts and various analytical tools.

　　How to trade in OTC

Trading in OTC is very simple. Just apply for an account through website and transfer funds not less than the required initial deposit, then you can start to trade through an on-line system at home or in any other place you like.

　　How to make profit

All OTC commodities can be traded in 2 ways. Investor can make profit by buying or selling at his/her own discretion and judgment. On an online trading platform, there are Bid/Ask prices for all commodities. If the price of a commodity is expected to go up, you can buy it in advance. When the selling price exceeds the original buying price, you can take profit by closing the buying position. On the contrary, if the price of a commodity is expected to go down, you can sell it in advance. When the Bid price is lower than the original Ask price, you can take profit by closing the outstanding position.

To understand the OTC market and profit making better, you can open a demo account to practice the trading rules and commodities details.