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.
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.
For more, check our roundup of the best brokers for penny stock trading.