Choosing a Penny Stock Broker
Choosing the right stock broker is definitely one of the keys to be a successful trader & investor. With so many online brokers it can be difficult in choosing one.
While, there isn’t a broker that specializes as just a “penny stock broker”, there are plenty of brokers out there that offer clients to invest or trade in penny stocks.
One of the main factors when choosing a broker is the commission. Commission rates vary from broker to broker and each broker has a different pricing structure for buying penny stocks.
But, just because a broker has very cheap commission rates doesn’t necessarily make them the best online penny stock broker to choose. Some brokers may have very cheap rates, but have poor execution on trades, low quality tools or platform and horrible customer service.
The best brokers may not always have the cheapest commission rates of all the others, but has a competitive commission structure along with a good mix of great trade execution, high-quality tools & platform and great customer service, which ultimately gives customers the greatest value.
Before you open a brokerage account check out their commission rates. Also, note some online discount brokers might charge a small extra fee for buying stocks that trade Over-the-Counter (OTC) or penny stocks trading under $1, so look into that as well.
List of Top Penny Stock Brokers
Below is my recommend list of penny stock brokers, all of which offer different features, but allow customers to invest/trade in penny stocks.
Suretrader
Suretrader is one of the newer brokers. They offer a really good value, offering a commission for only $4.95 per trade.
What I like about SureTrader is that you don’t need 25k to day trade, you just need 2k. Since they are based in the Bahamas you don’t have to worry about the Pattern day trader (PDT) rule.
For those not familiar with the PDT rule, it is a rule in the USA that if you buy and sell the same stock or option on the same trading day four or more times within a period of five trading days, you will be considered a pattern day trader.
Day traders are required to maintain $25,000 equity in their brokerage account at all times. If the account equity falls below $25,000, a day trading minimum equity call will be issued on the account requiring them to deposit additional funds or securities.
So, basically with SureTrader you can avoid the PDT rule and trade with just $2,000, instead of the normal 25k that is required to day trade in the USA. Besides that they offer great tools for traders and they also offer a free paper trading account, which is great for new traders that want to get some experience and education.
Another great thing about SureTrader is that they offer a great opportunity for trading and short selling penny stocks with lesser fees than brokers based in the United States. Visit the Suretrader website to learn more about them.
Suretrader – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $4.95 per trade | $1 | $500 |
Speedtrader
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SpeedTrader is the sister company of SureTrader. I have used SpeedTrader for a number of years now, and so far my experience with them has been good.
Both use the same platform and basically the same system. The reason I recommend SureTrader first is because you can day trade with them and bypass the pesky PDT rule. So, SureTrader is great anyone who has an account under $25k.
As far as commission, they offer very competitive commission rate with two options when you open an account.
- Plan A: is $6.95 per trade.
- Plan B: is .0039 per share, with a minimum of 1.99 per trade
The above commission rates can be negotiated for each individual trader.
Speedtrader uses the DAS Trader platform, which has been around for years. It is a great day trading platform that is simple, easy to use and with good execution. The platform comes with a fee, but it is waived if you generate a certain amount of commission for that month.
Speedtrader is great for trading penny stocks and currently has the best direct-routing for OTCBB/Pinksheets orders of any brokerage out there.
SpeedTrader – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $6.95 per trade or $.0039 per share ($1.99 minimum per trade) | $1.00 | $500 |
Interactive Brokers
Interactive Brokers is geared more towards traders and they are considered to have one of the best professional trading platforms in the industry.
Their commission rate is pay-per-share, where customers pay $0.005 per share, with $1 minimum per order and no maximum.
Interactive Brokers has no surcharges on penny stock and they have good borrows for shorting penny stocks, even penny stocks that that trade OTCBB/Pink Sheets.
Interactive Brokers – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $0.005 per share | $0.70 | $10,000 |
LightSpeed
I used to trade using Lightspeed when I first got started in day trading. I no longer use them because they don’t quite meet my trading needs because of my trading style. Their borrows to short penny stocks aren’t that great and I also don’t like that they clear through Penson. However, they do have decent borrows to short NASDAQ stocks.
While, they might be geared more towards active traders, they do offer a web version platform that investors can use.
What I like about Lightspeed is there clean and simple trading platform. Also, they offer great tools along with some of the lowest commissions in the industry.
There are two platforms available: Lightspeed Trader (min. $10K equity) and a Lightspeed Web version (min. $2K equity).
Lightspeed – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $4.50 per trade or $.0045 per share | $0.60 | $2000 |
As far as penny stocks, the standard commission rate applies to all penny stocks trading on the NASDAQ, NYSE, AMEX. Stocks trading on the OTCBB and Pink Sheets are $10.00 per trade.
ETRADE
Etrade is among the largest discount brokerages in the industry and one of the most popular. One of the best features I like about Etrade is that you can also setup a bank account and and IRA account and link them with your Etrade brokerage account for same day transfer of funds. Customers also get free debit card and check writing.
Their brokerage account offers great tools for both investors and traders. Currently their commission rate is $9.99 per trade and for more active traders the commission rate is $7.99 per trade.
As far as penny stocks, ETRADE allows customers to enter orders on NASDAQ and Listed stocks at prices under $1.00/share with up to 4 decimal places (“sub-pennies”). Orders for Pink Sheet and OTC Bulletin Board stocks at prices under $1.00/share with up to 4 decimal places are accepted as well.
They do have some Limitations on OTCBB and Pink Sheets orders:
- No short selling allowed for OTCBB & Pink Sheet stocks
- Generally, stop orders are not allowed for OTCBB/Pink Sheets trading.
- Due to the potential volatility and differential in price, for protection, market orders are not accepted on any stocks trading under $1 per share. Only limit orders are accepted for stocks trading below $1.
ETRADE – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $9.99 per trade or $7.99 per trade for active traders | $0.75 | $500 |
TradeKing
TradeKing merged with Zecco in 2012. Just recently, TradeKing was given a 5 out of 5-star rating on its trading platform by Barron’s magazine. They offer a low commission of just $4.95 per trade.
As far as penny stocks, TradeKing adds $0.01 per share on the entire order for stocks priced less than $2.00. For example, the commission rate of buying 1000 shares at $1 per share would be $14.95. So, penny stock trading is a bit more expensive compared to other brokers.
An interesting feature that TradeKing has is a social network community integrated into their site, where users can connect with other traders & investors and get investment ideas, learn new trading strategies, ask questions and get answers from more advanced investors in the community.
TradeKing – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $4.95 per trade | $0.65 | $0 |
Penny Stock fees:
TRADEKING adds $0.01 per share on the entire order for stocks priced less than $2.00. Maximum commission per order not to exceed 5% of the trade value, with minimum commission of $4.95. Minimum investment of $100 per order in OTCBB and Pink Sheet stocks. TRADEKING does not accept opening trades for stocks below $0.01 per share
TradeMONSTER
TradeMONSTER offers excellent, browser-based trading tools, especially for options traders. They offer a virtual trading account (paper trading account), which is immediately funded with $100,000 of virtual money and customers can start practicing trading and playing with trading tools right away.
TradeMonster’s commission rate is a flat $7.50 per trade. For penny stock trades, TradeMonster adds $0.0005 per share on the entire order for any stocks priced less than $1.00. This is in addition to the standard commission of $7.50 per trade. For example, the commission rate of buying 1000 shares for a stock trading at $1 per share would be $8.00
TradeMonster – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $7.50 per trade | $.50 | $2000 |
TD Ameritrade – Thinkorswim
TD Ameritrade is one of the best-known and largest online stock brokers. They offer great trading tools for both traders and investors. TD Ameritrade just recently bought Thinkorswim, which is one of the most powerful trading platforms out there.
Their commission is a flat-fee of $9.99 per trade and unlike most other brokerage firms, TD Ameritrade does not have surcharges penny stocks, large orders, and extended-hours trading.
TD Ameritrade – Standard Commissions
| Stock Trades | Options Per Contract | Min. Account Deposit |
| $9.99 per trade | $.75 | $0 |
In Summary:
The penny stock broker you end up choosing is based on your personal preference. I can not recommend one broker over another. The penny stock broker that will fit your needs is based on whether you are a trader or investor, your financial situation, style of trade and your time frame.
Once you have chosen a broker and opened an account, knowing how to buy penny stocks is one thing but knowing the best stocks to buy and when to sell them is another. Remember, penny stocks are volatile and speculative and buying penny stocks can be risky.
Sure, penny stocks can multiply many times over, compared to a slow-moving blue chip stock. Penny stocks offer you the chance to double, triple, quadruple your money.
But, people tend to see only the upside of penny stocks, while forgetting about the downside. A 50 cent stock can just as easily go down by 25 cents and lose half its value or more and may never get back to that level again.
So, before you jump right into investing or trading in penny stocks, you should always do your research on the stock of the company you are about to buy. Just don’t just go off and start buying random stocks hoping they’ll go up in value.
The point is, whenever investing in penny stocks or any other type of stock, make sure you do research and understand what you are getting into.
