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Best Brokers for Penny Stock Trading 2018

Jan. 3, 2018
Brokers, Investing
NerdWallet adheres to strict standards of editorial integrity to help you make decisions with confidence. Some of the products we feature are from partners. Here’s how we make money.
We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners. Here’s how we make money.

NerdWallet offers financial tools and advice to help people understand their options and make the best possible decisions. The guidance we offer and info we provide are deeply researched, objective and independent.

We spent over 300 hours reviewing the top online brokers before selecting the best for our readers. And to help you find the one that’s best for you, we’ve highlighted their pros, cons and current offers.

A little trepidation about investing in stocks never hurts. After all, you’re putting your money on the line. That healthy fear is particularly appropriate for penny stock investing.

Penny stocks — often called OTC or over-the-counter stocks — are a lot like they sound, though they don’t actually cost a penny. Generally defined as stocks that trade for less than $5 per share, penny stocks are traded outside the major stock exchanges. Instead, they’re quoted on the OTC Bulletin Board or through the OTC Markets Group — formerly known as Pink Sheets — a financial marketplace that lists 10,000 securities and allows investors to trade via online brokers. (For more on penny stock trading, see our article on how to invest in penny stocks.)

Five dollars a share seems like a steal when stacked against companies that trade for $500 or more. This is where the backstory is important: These stocks are cheap for a reason. Because they are issued by small, yet-to-be-established companies, penny stocks can be volatile. They are often hard to research and accurately value, and they trade infrequently, which means they can be tough to sell. Bottom line, there are plenty of other ways to expose your portfolio to stocks without ponying up a high share price — here are a few suggestions.

Choosing a penny stock broker

In case the above didn’t make this clear: NerdWallet does not recommend taking on the risks that come with trading penny stocks unless you are a sophisticated investor and you understand this market. But if you’re set on this strategy, you can at least go in with your eyes open.

In addition to the standard features you’d look for in a brokerage account — we’ve outlined those here — you’ll want to be aware of the following when selecting an online broker to trade penny stocks:

Trade surcharges: Brokers often add a surcharge to stocks that are valued at less than a certain dollar amount, though that threshold will vary by broker. Some consider anything trading under $5 to be a penny stock, while others put the cutoff at $3 or $1. Because penny stock trades typically involve a large number of shares, it’s usually best to skip brokers with a surcharge and look instead for a broker that charges a flat commission.

Volume restrictions: The best penny stock brokers allow trades of unlimited shares without additional fees, but a few charge more for large orders. Some brokers also limit the number of penny stock shares you can trade in one order or in one day, slowing your ability to trade and forcing you to pay another commission for a second order.

Trading restrictions: Watch out for firms that require you to trade penny stocks by placing a phone order or that impose limits on the types of trades you can execute. Ideally, your penny stock broker will allow you to trade penny stocks with the same online platform used for other stock trades.

Below are NerdWallet’s top brokerages for penny stock traders. You’ll notice that these brokers also appear on our list of the top online brokers for stock trading; they’re all well-rounded brokers that also offer a uniquely strong suite of features for penny stock trading. Read on to see which suits your trading preferences best.

Summary: Best brokers for penny stock trading

Account minimum


Trading platform
Extensive trading platform
$5.00 per trade
20% off commissions
Open Account

TD Ameritrade

Trading platform
Two powerful trade platforms
per trade
$100-$600 cash bonus (based on account size)
Open Account

Charles Schwab

Charles Schwab
low costs
Reasonable commission; two trading platforms
per trade
$100 to $500 cash bonus for deposits of $10,000 or more
Open Account

Interactive Brokers

Interactive Brokers
Low costs
Per-share commission
$0.005 per share
Special terms for younger traders
Open Account

Best overall value in trading penny stocks

This broker combines flat trade prices with quality execution, research and data tools.

Charles Schwab does everything that a good broker should, even in the penny-stock world. It allows you to trade a large selection of penny stocks, doesn’t have a surcharge and provides a high level of service. Schwab charges a flat $4.95 trade commission.


The lowest-cost penny stock brokers


These brokers will appeal to investors who prioritize low commissions.

If keeping costs low is what you’re after, then look to Interactive Brokers and Charles Schwab. Interactive Brokers is particularly strong for active traders, with its solid reputation for trade execution. The broker charges a commission of 0.5 cent per share, with a $1 minimum per order. There’s no surcharge for penny stocks, and commissions are capped at 0.5% of trade value. If you’re trading a few hundred shares of a higher-priced penny stock, you may well come out ahead with Interactive Brokers. First, though, you’ll need to meet the broker’s $10,000 account minimum and be OK with the monthly commission minimum of $10 (unless you have a balance of more than $100,000).

Schwab has a $4.95 flat commission, and that could be a more attractive setup if you’re buying thousands of shares of penny stocks at a time. Of course, whatever stocks you’re buying, you’ll get all of Schwab’s other benefits. Plus, the account minimum is lower, at $1,000.


The best trading platforms for penny stocks

These online brokers offer impressive trading platforms alongside flat commissions.

Our top overall picks will get you where you want to go, but if you’re looking for another way to get there, check out TD Ameritrade and TradeStation. With commissions at $6.95 per trade, TD Ameritrade costs a bit more than other brokers, but its thinkorswim platform is considered one of the best. If you’re starting out, you might prefer the broker’s Trade Architect platform, which is more suitable for beginners.

TradeStation charges $5 per trade, but you may be able to push that commission lower if you can opt for the broker’s per-share pricing or unbundled pricing tiers. With various account fees (closing, transfer and others) at the higher end of our range, TradeStation is a better bet for those with a bigger bankroll and more experience in the market. But you’re getting something for the money: an extensive and well-developed desktop platform with automatic execution and loads of strategy tools. OTC data costs $5 per month.

If you’re still on the fence about penny stocks, learn more about some of your other investment options: