What Broker to Use for Penny Stocks?

Willing to invest in stocks but don’t want to trade in more significant amounts? We get your point, and that’s why we feel Penny Stocks are the wisest form in this case. Available under $1, it is traded over the counter, hence considered a little riskier than the others. The companies offering penny stocks aren’t public at NYSE or NASDAQ because they are minimal in size and unprofitable to trade at higher margins. 

You can quickly start trading penny stocks online or anywhere else if you want to, but it is always better to have a broker by your side. So, to simplify the procedure for you, we’ve fetched details from over 11 brokers, found out their services, pricing, and other essential factors. So far, Ameritrade looks the best one to go forward with, but the others have some great points too.

What are penny stocks all about?

The whole procedure is approved by the US Securities and Exchange Commission (SEC). The concept behind penny stock is that it’s a kind of security that is the first choice for smaller companies when they wish to go public in the market. It trades at a maximum of $5, and most of the shares are priced at just $1. 

What Broker to Use for Penny Stocks?

The best brokers for trading penny stocks are:

  • Ameritrade

Ameritrade has the highest charges for penny stock trading. Regardless, it is the most preferred one considering the variety of trading tools they offer via their thinkorswim trading platform. The platform ended up being the number one choice in nearly every list. Ameritrade fees for penny stocks are a whopping $6.95.

They’re great for beginners since there are a lot of resources to go through before you begin trading. You can also trade in futures and forex from this platform. However, a con that constantly exists is that if you wish to change in the international market, that won’t be possible via this platform. But otherwise, it’s an excellent option to go for. 

Per OTCBB Trade: $6.95

Minimum Deposit: $0.00

Trading in stocks: $0.00

Trading in options: $0.65/Contract. 

  • Fidelity

Another platform with value-efficient services, Fidelity is a hub of great tools, user-friendly mobile applications, high-research output taking a look at the industry, and fair services if you wish to retire. There are over 32 million people already taking advantage of this interactive platform. Another reason why people prefer Fidelity is their Pick For Order Execution service. 

However, there is a high possibility of finding the margin rates on the higher end compared to the other options in the market. Furthermore, they do not have direct bank services, but a third party offers them. But, these points aren’t that crucial. Hence, it is one of the best options to go for. 

Per OTCBB Trade: $0

Minimum DepoDeposit

Trading in stocks: $0

Trading in options: $0.65/Contract. 

  • Charles Schwab

When it comes to penny stock trading, Charles Schwab charges no fee at all, which is one of the reasons why it’s one of the best brokers for otc trading. In addition, there is a fair share of research outputs and stock options available on their StreetSmart Edge desktop platform. In terms of market reputation, Charles Schwab is often known for its long-term investment and retirement services, but they have pretty much everything a trader would need. 

They have fractional shares available and provide various financial planning services, both being an added advantage. On the contrary, the only issue is their lack of a mobile app. But if you’re looking for something extremely affordable, then Charles Schwab is the way to go. 

Per OTCBB Trade: $0

Minimum DepoDeposit

Trading in stocks: $0

Trading in options: $0.65/Contract. 

  • Interactive Brokers

While Interactive Brokers are a little bit on an expensive note regarding penny stocks, the margin rates come on a lower end. Their options of under-a-dollar stock are extensive compared to others such as Ameritrade. Another added advantage is the web-based portal they have for their clients. So if you’re an investor who is only interested in investing casually, this is the option for you. 

Along with that, you get access to the entire market, and their mobile app is handy for trading on the go. But, their desktop platform is not for you if you’re a beginner. 

Per OTCBB Trade: $0.035/Share.

Minimum DepoDeposit

Trading in stocks: $0

Trading in options: $0.65/Contract. 

  • TradeStation

If you’re interested in using TradeStation, their fee is zero if you’re trading for up to 10,000 shares, and after that, it will be $0.01 per share. They have won an award for the best technology in terms of trading, and their platform has several kinds of advanced penny stock trading tools. In addition, the web-based and desktop trading platforms provided by them are very user-friendly. On the other hand, if you wish to trade in cryptocurrency, you can also do so with this platform.

But, it is ideal if you’re a professional in this industry, and their resources are spread across two sites, meaning you’ll have some difficulty fetching resources. 

Per OTCBB Trade: $0 (Up to 10,000 shares)

Minimum Deposit: $0

Trading in stocks: $0

Trading in options: $0.50/Contract. 

The cost involved: How much does it cost to trade in penny stocks?

When you begin trading in penny stocks, the cost involved depends on the broker platform you’ve opted for. Going for a trading platform that provides flat fee rates rather than pay per share is always wise since that is an inexpensive way to trade. Another way to reduce cost is to avoid brokers with a monthly platform fee, and minimum depoDepositce expenses like these always add up. 

1st Example: Does TD Ameritrade charge for penny stocks? As mentioned above, it charges $6.95, which is relatively high. Fidelity, on the other hand, has no charge at all. But with both platforms, the costs involved are just $0 and $6.95.

2nd Example: If you look at Interactive Brokers, they charge $0.035 per share and a cost of 0.5% at its maximum. If you buy 10,000 shares of a penny stock named ABC, at $0.13 per share ($1,300), 10,000×0.035= $35, whereas 1,300×0.5% is $6.5. Therefore, the cost involved will be $6.5 considering the trade value, i.e., 0.5%.

Do penny stocks have the capability to make you rich?

Taking a look at the records, the majority of the investors have only faced a loss in penny stocks. The stories people have earned from penny stocks are only found on social media, which promises zero credibility. There are a lot of scams going out there where scammers will display you proof of profits with lesser risk, and for you to “learn how they work,” they’ll charge you a high fee. 

If you wish to identify the authenticity, then check out the newsletters they’ve issued, the chatrooms, other subscriptions they’ve offered, and the live streams going on at their pages and portals. Again, it is essential to identify the frauds before getting stuck in any situation. 

Beginners and penny stocks

Are you looking for the cheapest penny stock trader as a beginner? Do you know where to start? If not, you should see the penny stocks are mostly available at unregulated exchanges. Unfortunately, it is often tough to identify which penny stock you should go for with so many ethical and unethical schemes around. 

Find a trustworthy platform, open up an online brokerage account, place your funds; if you know the stock you’re interested in, type its symbol, then place your final order, and that’s it!

Where can you find penny stocks?

To find good penny stocks, you must know a market mover list or a penny stock screener. For instance, Small Cap with Momentum and Yahoo Finance Trading Tickers have companies listed that display price jumps throughout the trading hours. Therefore, when you look forward to day trading, the best time is to begin after 9:30 AM when the market starts for the day. 

Penny stocks: Good idea or not?

If you’re going to purchase penny stocks, here are five things you should know:

  • Be aware of any sorts of fraudulent activities: It’s essential to stay careful as there are a lot of fake schemes going on out there. 
  • Be aware of all costs: Go for a broker that offers flat-fee trades. 
  • Penny stocks bear risk: Although available at $1 and less, these stocks have a very high risk. 
  • Conduct research of your own: Go through the company’s background before you invest. 
  • Ignore the paid promotions coming your way: The emails and messages coming to you claiming greater returns are purely fraudulent; therefore, avoid them. 

Can the prices of these stocks be manipulated?

Considering the low selling shares when it comes to these under dollar ones, the prices can change at any possible moment. Such manipulations make you a victim of any irregular or irrelevant scheme related to the same. 

OTC Stocks and risk factors: what makes it so risky?

Even the best broker for OTC trading cannot get you penny stocks that are regulated. Regular stocks are traded in reputed markets such as NASDAQ and NYSE, and those companies have to report from time to time. At the same time, there is no such regulation of submitting quarterly reports and details in the case of these stocks. Stocks at $1 are risky because there are zero strict regulations in terms of finance. 

Penny stock myth: The most common ones

Often when a person begins trading in penny stocks, they feel they’re going to get more in return as they can buy more and more stocks. But on the contrary, this is a huge myth; in fact, OTC stocks are a riskier format. Furthermore, the information present on these stocks is limited, hence at times, you settle for what’s available and end up having a loss. 

Robinhood and OTC stocks

Can you trade OTC stocks on Robinhood? Sadly, there is no option to change OTC stocks on this platform. If you find any penny stock listed on their platform, then those would be the ones regulated by either NASDAQ or NYSE. Also, those penny stocks you see on the forum, if they’re selling for 1 dollar or less for a longer time, they are discontinued and then traded per the OTC guideline only. Therefore, here’s another point why OTC platforms are risky. 

To Summarize with

Last but not least, let’s take a recap of the platforms available to trade in penny stocks:

  • Ameritrade:

They charge the highest at $6.95 per OTCBB trade but are one of the best and have a set of ideal tools for beginners.

  • Fidelity: 

$0 for OTCBB trading, have a lot of tools, and are user-friendly with over 32 million satisfied customers. 

  • Charles Schwab: 

$0 per OTCBB trading, Smart Edge desktop platform present, interactive tools, is the cheapest option available out there. 

  • Interactive Brokers: 

On a higher level, with $0.035 per OTCBB trading, they have a lot more tools than Ameritrade; in fact, they even have a mobile app to trade on the go. 

  • Trade Station: 

$0 per OTCBB trading for up to 10,000 shares; exceeding that, it will be $0.01 per share. Web-based and desktop trading platforms are available, and you can also trade in crypto via them. 

With this, you now have every little piece of information on penny stocks, and you’re all set to trade if you want to!



Igor has been a trader since 2007. Currently, Igor works for several prop trading companies. He is an expert in financial niche, long-term trading, and weekly technical levels. The primary field of Igor's research is the application of machine learning in algorithmic trading. Education: Computer Engineering and Ph.D. in machine learning. Igor regularly publishes trading-related videos on the Fxigor Youtube channel. To contact Igor write on: igor@forex.in.rs

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