Investing > Best Brokers for Penny Stock Trading

Best Brokers for Penny Stock Trading

Penny stock trading can be a synonym for risk. This article shows you which brokers can help minimize risk — by finding the right platform for penny stocks.

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High risk investments like penny stocks have their advantages if you want to buy and hold stocks. There are always some top penny stocks to buy each quarter, but it can be tough to find the right stock on the right brokerage platform at the right time.

That said, penny stocks are an attractive investment given that they have a low barrier to entry and the possibility of a large return. Investors can buy thousands of shares with very little capital, and even if the shares only gain a few cents here and there, investors still reap the profits.

Note: A penny stock – or OTC (over-the-counter) stock – is generally one that trades under $5 and has less liquidity than other stocks. (Not necessarily one that is bought for pennies, as the name would imply.)

These stocks are cheap because they typically come from small, unknown companies that aren’t established yet. This means that they can be volatile and never go anywhere, or you can strike it rich when they release a groundbreaking product. With a little research and analysis, you can pick out some penny stocks that may be worth your while if you have a small amount of free capital.

Whatever you do as investor, you never want to pick a stock simply because it means more to you than the research. Victor Sperandeo who made 300% back on his money during the stock market crash in the 1980s, had this to say about investing:

“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”

Our guide to penny stock brokers considers research tools and fees most of all. You want a penny stockbroker that is easy to access and have very little to no trade surcharges for OTC stocks. Here are our picks for the best penny stock brokers currently.

Top Penny Stock Trading Brokers

This is our top pick of the brokers based on fees and research tools’ quality:

1. E*Trade
Best Overall
2. TD Ameritrade
Outstanding research tools for penny stock analysis
3. Fidelity
Best Fees for Penny Stock Trading
4. TradeStation
Best Tools for Active Traders
5. Charles Schwab
Best Research Tools

Best Penny Stock Brokers

1. E*Trade: Easiest Platform for Researching Penny Stocks

Screenshot of Etrade website with Trading page selected
E*Trade’s platform provides penny stock traders with superior easy-to-use research tools.

With its $0 fee structure and variety of research tools, active trades can find worthwhile OTC stocks and don’t need to pay anything extra to purchase them

Pros

  • No commission fees or trading fees for penny stocks
  • Easy-to-use online and mobile tools
  • Large selection of penny stocks with risk evaluation tools

Cons

  • Website can be overwhelming with number of education tools
  • High margin rates, especially for very active traders
Visit E*Trade on E*Trade’s website

E*Trade has long been at the top when it comes to online trading platforms, but with penny stocks, it truly has some innovative risk assessment tools to help traders headed into these volatile markets. You can use Power E*Trade without any account minimum to start trading penny stocks. However, E-Trade Web offers the most streaming web data and real-time quotes with an analyst research stock screener.

You can add stocks to your dashboard and watch lists in order to get a better idea of the stock’s trend before buying into it. You can set up 100 technical studies, use over 30 drawing tools, streamline your trade tickets, and customize trade ladders all within the same platform. However, if you want to see other benefits that E*Trade provides, check our E*Trade review.


2. TD Ameritrade: Most Robust Platform for Penny Stocks

TD Ameritrade website's trading tools and platforms page
TD Ameritrade provides penny stock traders with advanced trading and market analysis tools.

You can feel safer about trading penny stocks with TD Ameritrade, but it’s not as cheap as other platforms. With a $6.95 per OTCBB, many traders still find it less risky to buy and sell with TD Ameritrade since their stocks are quoted from FINRA’s OTC “bulletin board” marketplace.

Pros

  • Access to thinkorswim trading platform’s tools
  • Amazing research tools to analyze penny stocks
  • Better quality of analysis and real-time data

Cons

  • TD Ameritrade advertises $0 commission fees, but they do charge $6.95 for OTC trades
Visit TD Ameritrade on TD Ameritrade’s website

If you want to trade penny stocks without any commissions whatsoever, TD Ameritrade is not for you. However, if you want to find the best penny stocks to trade, TD Ameritrade has the most comprehensive research tools, analysis software, and real-time streaming data. You can use their platform to set up penny stock trades that are most worthwhile and mitigate most of the risk using their company profiling and social sentiment tools.

Ultimately, the thinkorswim earning analysis tool is the best way to plan ahead and assess a penny stock company’s worth. The tool uses price action and volatility to look at data before and after they release new products.

It also uses real-time data from Wall Street analysts and crowd-sourced data from Estimize. You may only find one or two worthwhile penny stocks each year with this platform, but it could lead to much bigger payouts in the long run.


3. Fidelity: Best Overall for Trading Penny Stocks

Fidelity website homepage with login section
Fidelity provides all of their users with free penny stock trading and advanced trading platform features.

You won’t even be charged a penny by Fidelity for trading in penny stocks, which is what makes the platform so great for cheap capital investments.

Pros

  • Amazing order execution quality
  • $0 fees for penny stock trades
  • Shows excellent price improvement
  • Access to Active TraderPro for every customer
  • Stock screener tools help you find the best stocks

Cons

  • Using tools may require signing in to multiple platforms
  • Non-US citizens cannot make accounts
Visit Fidelity on Fidelity’s website

Fidelity has improved its platform considerably and now they are at the higher end of price improvements. With highly rated execution quality and stock screening tools, you can easily find your next penny stock to buy and hold. You can research any penny stock in any market sector with their Active Trader Pro tools, and you don’t have to pay any fees to buy and sell penny stocks either.

You don’t have to have a minimum account balance either to open a Fidelity account, making it generally easy for anyone to start trading even at a low amount with OTC stocks. The website and mobile app are extremely user-friendly, and there are hundreds of educational tips and courses you can use to get better at trading, too. You can inform yourself further about Fidelity’s research tools and advantages in our comprehensive Fidelity review.


4. TradeStation: The Best Platform for Active Traders

TradeStation website homepage with learn more section
TradeStation offers top-notch online services that especially benefit active penny stock traders.

TradeStation’s whole premise is that the more you trade with them, the lower your fees will be. However, they don’t charge any commission fees on penny stocks with their newest service TSgo.

Pros

  • Robust and customizable real-time market screening
  • The best charts in the stock trading world, and you can cancel stock trades inside the chart tool
  • Excellent trade execution quality
  • Technical analysis and research tools
  • TSgo offers commission-free penny stock trades

Cons

  • $500 account minimum to start
  • Fees on ETFs and stocks
  • Too many pricing plans, so just stick with TSgo
Visit TradeStation on TradeStation’s website

TradeStation is super fast when it comes to trade executions. They’ve always been the “pro trader’s exchange,” and they have a ton of customizable tools for experienced traders. If you are an active trader, you probably have used TradeStation in the past to get the lowest fees possible on large purchase orders. However, with their new platform TSgo, you don’t have any fees, particularly with penny stocks.

The best part about TradeStation is that they have intuitive market screening tools to help you mitigate risk. You can also set up your own automatic trading system using their analysis tools and backtesting options.

With its stable platform and very little downtime, you can set up a few buys for penny stocks that interest you and assess their risk instantly. The education tools on the website are robust and allow you to dig deep into other trading tools and strategies.


5. Charles Schwab: Best Full-Service Broker with Commission-Free Penny Stocks

Charles Schwab homepage with "Why Schwab" section selected
Charles Schwab’s online platform aims to better trading experience for expert penny stock traders.

Charles Schwab is one of the top-ranking brokers around. With a combination of both full-service and discount brokerage platforms, you get the best of both worlds, and Schwab recently eliminated all of their commission fees on stocks, ETFs, and penny stocks.

Pros

  • Advanced research tools and trading ideas through StreetSmart Edge platform
  • Exchange analysis so you can see inherent risk for penny stocks
  • $0 account minimum
  • $0 fees on penny stock trades

Cons

  • Big learning curve for using features and reporting tools
  • Several different trading platforms to try, which can be confusing
  • Schwab pushes full service advisors on customers, leading to lack of trader confidence
Visit Charles Schwab on Charles Schwab’s website

If you don’t get swept up into the full-service advisor approach, you can win big with Charles Schwab’s online tools. The StreetSmart Edge platform has customizable dashboards that allow you to watch any exchange or stock. You can select all kinds of penny stocks and create custom charts to assess history and risk, too.

Since Schwab recently eliminated all fees for penny stocks, it has risen sharply in quality. You can set up all kinds of trade orders using the StreetSmart platform and see the volatility of the stocks you are purchasing in an instant. The Idea Hub tool also gives you a deeper analysis of the trade before you send.

You can analyze your entire portfolio and test it for risk using Schwab’s Portfolio Checkup tool. As far as customer support, you’ll get basic phone support unless you sign up for a premier account, which ushers you to the front of the line. More information about the way Charles Schwab operates is available in our thorough Charles Schwab review.


How to Choose a Penny Stock Broker

The Tokenist illustration of a man sitting in front of his desk looking for best penny stock trading brokers
Search for a broker that allows you to find worthy penny stocks for free.

We’ve all seen Wolf of Wall Street. The days of the scam artist penny stockbrokers are not over, but it’s easier to spot them and avoid falling into a trap. In fact, you can simply use online stock brokers with $0 commission fees to find your own worthwhile penny stocks.

However, what if you haven’t done the research or don’t know how to do a technical analysis on the penny stock? It’s actually difficult to find out about OTC companies because they are typically startups or little known businesses in the midwest.

In addition to research tools, you also want to make sure that you aren’t paying any additional fees to trade cheaply. Some brokerage firms do charge you more to trade in penny stocks, such as TD Ameritrade.

These are some of the things to look out for when you pick a penny stockbroker.

Heads Up: Trade Surcharges

Does the broker you use charge a fee for stocks that are valued less than a certain dollar amount?

These are trade surcharges that typically apply to penny stocks because of their extremely stock price. These thresholds change depending on the broker, but most consider anything under $5 to be a penny stock trade.

Some put the threshold at $1 or $3. Since you are trading in a larger number of shares, it’s best to avoid any broker that charges you more than the stock price in fees.

Restricted Trading Volumes

You want a penny stockbroker that doesn’t place any restrictions when it comes to penny stock trades because you will likely buy hundreds or thousands of shares at once.

A few brokers actually charge for larger volume orders. In addition, brokers pay special attention to the amount of penny stock shares that you can trade in one day or in one order. This slows you down and makes it difficult to trade on something so cheap. You should avoid any broker that tries to limit your penny stock trade volume.

Special Penny Trade Restrictions

Some brokerage firms won’t even let you trade in penny stocks online. You have to place a phone order. In other cases, they may limit the types of orders you can make with a penny trade.

While you probably aren’t looking to waste too much time thinking about strategies, you should only work with brokers who let you trade penny stocks in the same way you would other stocks.

Market Research and Exchange Rating Tools

When it comes to penny stocks, you want to access quick information about the company and get a feel for what they’re doing. Do they have any news? Do they have any trading history?

With larger brokers like E*Trade, TD Ameritrade, Charles Schwab, and Fidelity, you’ll have access to a number of research tools that you may not get with smaller broker firms.

When in doubt, simply look at OTCBB market research. Charles Schwab, ChoiceTrade, and Interactive Brokers offer access to OTCBB and Pink Sheets. However, you should be careful and check fee structures with Choice Trade and Interactive Brokers. Pink Sheets are also not registered with the SEC nor do they have to meet any listing requirements.

Can You Day Trade Penny Stocks?

You can – provided that your platform of choice supports such an option. You should, however, keep in mind that this combines two risky, volatile investment strategies – both of which require quite a bit of know-how and experience.

What is a Good Volume for Penny Stocks?

Generally speaking, penny stocks with a volume of 50,000 or less should be completely avoided. Ideally, you should focus your attention entirely on stocks that have an average daily trading volume of 100,000 or more.

On the other hand, stocks with a trading volume over 10,000,000 are also considered unsafe. The high volume of trades could result in increased volatility – which means increased risk.

Was Apple a Penny Stock?

No – Apple was never a penny stock. The Securities and Exchange Commission (SEC) defines a penny stock as a security that trades for under $5 per share.

Apple’s stock splits might lead you to believe that it was once a penny stock. Yet when the price is adjusted, the historical low of Apple’s stock worth is around $8. 

How Much Money Do You Need to Start Investing in Penny Stocks?

There is no set amount of money required to start investing in penny stocks. However, you should keep in mind that many brokerages have a minimum deposit amount.

Trading fees, commissions, and other costs also play a role in determining how much money you should set aside before you start investing. When it comes to penny stocks, $5000 is generally considered a safe amount that will allow you to recover potential losses and continue trading despite the occasional setback.

What is the Most Successful Penny Stock Ever?

Monster Beverage, the company that created the widely popular Monster energy drink, used to be a penny stock. It initially traded at just $0.69 cents in 1995. Currently, the company’s stock is worth upwards of $80. 

Can You Actually Make Money with Penny Stocks?

Yes – you can, but that does not change the fact that penny stocks are risky. Provided that you take the time to educate yourself and learn the ropes, you can make money with these stocks – but it does take a lot of effort.

Is it Hard to Sell Penny Stocks?

Selling a penny stock can be hard – if the stock’s trading volume is low. However, as you’re going to want to focus on high-volume stocks, this shouldn’t be a major issue.

What Percentage of Penny Stocks Fail?

Although you can come across some pretty outlandish claims online, such as 99%, the truth of the matter is that we simply do not have reliable data regarding this issue. However, a vast majority of penny stocks do indeed fail.

How Long Does it Take to Learn Penny Stocks?

How long it will take you to reach steady, consistent profits cannot be accurately estimated. It will depend on how much time and effort you can commit to educating yourself on a daily basis. Before you begin trading penny stocks, you should learn the basics of stock trading through simulated trading to avoid incurring unnecessary losses.

What is the Cheapest Penny Stock?

Penny stocks are unpredictable, volatile, and risky. The actual answer to this question changes at a rapid pace.

However, we would caution you against this line of thinking – ultra-cheap penny stocks are usually not worth the risk. In general, you should stay away from penny stocks that trade at less than 50 cents a share.

Can You Buy and Sell the Same Stock Repeatedly?

This practice is called day trading. If your broker allows it, you can make a certain amount of these trades per week – any more than that, and you’ll have to comply with pattern day trading rules, which require you to keep a significant amount of capital on hand.

If day trading is what you’re after, check out our report on the top day trading platforms. They each have their own strengths and weaknesses, as some will align better to your investing strategy.

How Do I Pick a Good Penny Stock?

Before you decide to invest in a stock, check the company’s 10-K form. This will allow you to get a good overall sense of their business.

You shouldn’t waste your time with OTC penny stocks – instead, focus your attention on stocks that can be found on reputable exchanges such as NASDAQ and the NYSE. The stocks that are most likely to be profitable will combine high trading volume and high volatility.

Want to see more brokers? See our forex broker report as well as our options trading report.

All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

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