Best Brokers for Penny Stock Trading

Investing a penny can earn you a dollar.

That is the ideal investment—go in with little money and make a small fortune later down the line. That’s why investors find the aptly named penny stocks so alluring.

They can be very profitable, but only if you navigate the sea of risk like a pro—and that’s not advised for novice sailors. 🚢

Penny stocks belong to small, usually new companies, very few of which have the potential to explode—but they are all cheap. Therefore, this type of investing has a very, very low barrier to entry.

But volatile as they are, penny stocks are an asset type you shouldn’t go near without top-notch research. Once you’ve got that minesweeper in your hand, only then does investment becomes viable.

That’s why it’s crucial to use a suitable broker with the lowest commissions and the research tools that can help you separate diamonds from coal. Let’s see what makes a broker good for penny stock trading and how that can help your coin purse. 👛

Best Penny Stock Brokers

1. TradeStation: Best Overall

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.

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.

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

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

E*Trade has long been at the top when it comes to popular 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.

3. TD Ameritrade: Most Robust Platform for Penny Stocks

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.

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.

4. Fidelity: Best Fees for Trading Penny Stocks

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.

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.

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

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.

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 📈

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 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. All-in-all, trading penny stocks can be very risky, so investors need to know what they’re getting themselves into.

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 Access ⚒️

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.

About the author

Tim Fries

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Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.