Stock Market Glossary
OTC trading
Over-the-counter trading directly between two parties.
In brief: Over-the-counter trading directly between two parties.
Meaning in practice
In over-the-counter trading, conditions are negotiated individually – without a central marketplace. Advantages are flexibility and large volumes, disadvantages are lower transparency and higher counterparty risk.
Context for investors and traders
For investors, the term becomes practical in the context of objectives, time horizon, risk capacity and costs. A suitable solution can differ between two people even when they consider the same product or metric.
How to use this in practice
The term becomes practical when expressed in numbers: what is the position weight, which costs apply, what loss is possible and what role does it play in the portfolio? These questions prevent an otherwise useful product from becoming too large or being used at the wrong time.
What to keep in mind
Include taxes, spreads, product structure and personal liquidity reserves in comparisons. Historical returns and a fund’s or index’s characteristics describe the past, not a promised future result.