So, you want to trade penny stocks. They seem like a great alternative; they’re quite inexpensive and can offer spectacular returns. However, you have to be careful where you choose to trade them. Many brokers try to discourage their clients from trading penny stocks by adding extra fees to their normal commission, but these additional fees shouldn’t be ignored.
In order to help you save money, we’ve scoured every U.S. brokerage account available to find you the best places to trade penny stocks:
optionsXpress customers have access to a great selection of penny stocks at a flat rate, with no additional fees. However, the brokerage doesn’t allow customers to short stock, something for active traders to keep in mind. Active traders may be impressed, though, with optionsXpress’ trading tools. The brokerage has generated some excitement recently with its Idea Hub, which combines the functionality of several different site tools, allowing users to search for trade ideas by category – including earning and volatility – and market sentiment. All of the firm’s customer service options, including email, receive generally good reviews, although some note that email response times can be slow.
ChoiceTrade’s penny stock commission is very reasonable, but the company does have a number of limitations. There’s a volume surcharge (1% of the trade value in trades of over 500,000 shares), and customers aren’t allowed to short. In addition, they won’t trade any stocks valued at under 5 cents.
Your Guide to Trading: Focus on the Fees
Additional fees shouldn’t simply be glanced over. For example, let’s say a broker’s normal commission is $7.95, but they add 1% of the trade value since you’re trading penny stocks. If you purchase 1,000 shares at $1/share, then the total commission becomes $17.95; the commission has more than doubled. If you make multiple trades per month, these fees will quickly add up and can become greater than your profits.