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Best Brokers for Penny Stock Trading 2019

Jan. 3, 2018
Brokers, Investing
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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 many of 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

Broker
Best
for
Highlights
Commiss-
ions
Promotion
Account minimum
Get
started

Charles Schwab

Charles Schwab
Overall and no account minimum
Flat commission; strong trading platforms and tools
$4.95
per trade
$100 referral award for first-time clients
$0
Open Account

E*Trade

E*Trade
Overall
Flat commission; volume discounts available
$6.95
per trade
Up to $600 cash credit with a qualifying deposit
$500
Open Account

Zacks Trade

Zacks Trade
Low costs
Per-share commission
$0.01 per share; $3 minimum

$1 minimum through April 15, 2019
$2,500
Open Account

Interactive Brokers

Interactive Brokers
Low costs
Per-share commission
$0.005 per share; $1 minimum
Special terms for younger traders
$0
Open Account

TradeStation

Trading platform
Professional-level trading platform
$5.00 per trade
None
$500
Open Account

TD Ameritrade

Trading platform and no account minimum
Two powerful trade platforms
$6.95
per trade
$100 - $600 cash bonus with qualifying deposit
$0
Open Account

Best overall value in trading penny stocks

These brokers combine flat trade prices with quality execution, research and data tools.

Because penny stocks are by nature priced low per share, penny stock traders typically trade large volumes. That lends itself to brokers with flat commissions, meaning you can trade any number of shares for one fee. Charles Schwab and E-Trade top the list here.

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 offers strong research, tools and trading platforms. Schwab charges a flat $4.95 trade commission.

E-Trade charges a flat $6.95 trade commission, but reduces that to $4.95 per trade for high-volume traders, defined as those who trade 30 or more times per quarter. Like Charles Schwab, the company offers high-quality platforms and tools without extra fees.

The lowest-cost penny stock brokers

These brokers will appeal to investors who want to pay commissions on a per-share basis. 

If per-share pricing is what you’re after, then look to Interactive Brokers and Zacks Trade.

Interactive Brokers offers the lowest pricing of the two, charging just half a cent per share with a $1 commission minimum. The broker also imposes monthly commission minimums of $10 for accounts with balances of $100,000 or less. If that minimum isn’t met, the difference is charged as an inactivity fee.

Zacks Trade charges one cent per share, with a $3 minimum. (On stocks priced below $1 per share, Zacks Trade’s commission changes to 1% of the trade value, subject to the $3 minimum.)

The twist: Both brokers offer the same trading platforms, as Zacks Trade white-labels the platforms and mobile app from Interactive Brokers. One distinction that gives Zacks Trade a leg up for beginner traders: Each Zacks customer is paired with a dedicated broker, with no extra fee for phone trades.

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 additional options, 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.

Best for no account minimum

These brokers require no minimum deposit to open an account. 

Since part of the appeal of penny stocks is their low share price — which means you can invest small amounts of money — you might want a broker with no account minimum. Both Charles Schwab and TD Ameritrade fit the bill.


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

Jim Royal also contributed to this article.