Penny Stocks are highly speculative investments because of large bid-ask spreads, small capitalization, limiting filing, and lack of liquidity. It is a high-risk market but the low price enables investors to purchase thousands of shares for a minuscule amount of capital.
Investors can make a decent profit even if it is a few cents per share if they hold a large sum of shares. But to mitigate the liabilities and earn a better profit on shares, having a reliable brokerage platform is imperative.
Hence, we have compiled a list of some of the best brokers for penny stocks that have low account minimum, access to the OTC market, and reasonable commission charges. So, let’s take a look at them.
1. Firstrade – Large Selection of OTC Stocks with Competitive Fee Structure
Firstrade is amongst the pioneers of online brokerage firms that were launched back in 1985 and began online operations in 1997. It offers a decent and user-friendly platform and a large selection of OTC stocks.
It is also a good fit for investments in conventional assets like bonds, exchange-traded funds, and stocks. Furthermore, options traders would also find it appealing as it does not charge a per-contract fee.
Like the majority of online brokers, Firstrade charges zero commission on the trading of EFTs and stocks. In addition, it has cut down most other fees as well. Most mutual funds trades are free but there are few offerings that charge sales fees. For fixed investments like bonds, it charges on the net yield basis and it is already included in the displayed yield.
Furthermore, customers can access a live broker over the phone to get assistance in stock, mutual funds, and EFTs. Customer support for options contracts is also available; both services charge additional costs. The basic services are offered at 19.95$ and the option contract service can be availed at an additional 0.50$ per contract.
The trading platform of Firstrade offers all the basic tools that are required by regular investors. But the professional traders might not find them adequate and would have to do a bit of research on their own. The standard trading platform is available for all operating systems including Windows, macOS, Android, and iOS.
You would get two columns of information on the dashboard by default. The first enlists balances, order status, and value charts that show your performance over time. The other section is loaded with market information that includes news, stock market indexes, day’s biggest losers, and winners.
Lastly, the security of the Firstrade covers all the bases which include firewall, account encryption, two-factor authentication, and plenty of other mobile security features. It also offers the standard $500,000 of SIPC coverage and additional $37.5 million coverage for securities from its insurance firm.
Pros
- No cap on minimum account balance
- Range of educational materials on options
- Customizable dashboard
- No per contract commission fee
- Advanced trading orders
Cons
- Only basic research tools
- Expensive margin rates
2. E*TRADE – Powerful Trading Tools and Comprehensive Educational Material For All Traders
E*TRADE is a beginner-friendly online broker that offers tons of educational material, portfolio-building tools, and a large selection of OTC stocks. The 0$ commission is certainly the standout feature but it has offerings beyond that as well.
It is also a decent option for professional traders because of a powerful E*TRADE platform that has comprehensive charting tools, risk metrics, and options strategies.
Furthermore, the platform charges average fees and offers commission-free trades of ETFs and stocks. Per contract fee is $0.65 which is reasonable but there are other platforms that are even cheaper.
Mutual fund traders would appreciate a no-load, no transaction fee fund. That said, users would have to pay a redemption fee of $49.99 on selling these funds within the 90 days of purchase.
E*TRADE also offers a lineup of accounts that makes it suitable for a wider audience. These include taxable brokerage accounts, tax-advantaged individual retirement accounts, Coverdell education savings accounts, and custodial accounts. You can pick between them based on your financial picture and future planning.
The trading platform of the E*TRADE is designed for intermediate to advanced investors. But with the available educational material, beginners can also get a hold of it in no time. Its interface is simple yet intuitive that includes a live-streaming Bloomberg TV feed.
Technical traders can benefit from 145 charting tools for in-depth analysis. In addition, watchlists, screeners, alerts, and extended trading are also available.
Furthermore, E*TRADE offers a range of portfolio management services for hands-off investors. There are four levels of management that have varying balance requirements and cater to specific types of investors.
However, in contrast to trading accounts, these have a cap on the minimum account balance. You would have to maintain a $500 minimum balance and pay an annual fee of 0.30% per asset that is under management.
Lastly, the platform offers extensive educational and research material for all levels of traders. You have real-time quotes and streaming market news to anticipate the values of the asset.
Furthermore, the listings are organized in categories which makes it convenient to navigate around. More importantly, the research material and screeners are integrated within the trading platform which means you can stop the trade within milliseconds if the market goes south.
Pros
- Tons of educational material
- Multiple account types for different investors
- Large OTC stock listings
- Free access to financial specialists and consultants
- Paper trading to test new strategies
- Powerful tools for options and futures traders
Cons
- Trading with cryptocurrencies is not available
- Subpar customer support
3. Fidelity – Plain & Simple Fee Structure and Plenty of Accounts For All Type Of Users
Fidelity is a brokerage platform that is a great fit for new and expert investors alike. It offers powerful research tools, comprehensive educational material, and more importantly, charges minimum costs on the trades. Furthermore, it does not put a cap on the minimum balance and charges $0 on stock trades.
Active Trader Pro is Fidelity’s flagship trading platform which not only offers all the tools but a decent extent of personalization as well. You can build stock charts, have dozens of technical indicators and order multiple trades simultaneously.
Other tools like Real-Time Analytics and Trade Armor are also integrated into platforms that make for easy access. The cherry on top? You can also pull Bloomberg TV streaming on the desktop as well.
Furthermore, Fidelity has launched a Spire Application which helps a great deal in achieving the financial goals. You can link all the bank accounts to it and get a complete picture of financial health. The application lets you set short- and long-term financial goals and tracks your progress towards them. You would also make better and more informed investments by having a complete picture of finances in your sight all the time.
Amongst all the online brokers, Fidelity probably has the simplest fee and commission structure. You do not have to worry about nickel and dime every time you make a trade or transaction. Standard categories like account, transfer-out, and activity have no fee.
Plus, some more obscure categories like closeout and reorganization are also free. For perspective, there are brokers that charge as high as $125 for transfer-outs. The platform does not charge additional fees on payment of utility bills as well.
Moving on, the users can trade in all sorts of stocks including the penny, mutual funds, and options. Plus, the platform offers all sorts of accounts including joint, business, and health savings accounts.
Lastly, the clients can also get portfolio management services that are basic but are priced much cheaper than the competition. We would not recommend it to experienced investors but it is a solid option for newcomers.
Pros
- Simple fee structure
- Plenty of account types
- Cheaper portfolio management services
- Customizable trading platform
- No additional fee on payment of utility bills
Cons
- Relatively high fees on broker-assisted trades
4. Ameritrade – Design Your Own Tools To Make Better Trades
Ameritrade is a complete package with its zero-trade commission, top-of-the-line educational services, and a smooth-running mobile application. It offers a full-service brokerage that fits both experienced and those that are still learning the ropes. Multiple trading platforms with varying levels of difficulty let the users choose as per their experience in the trading.
Like the rest of the brokers on our list, it charges no fee on the purchase of stocks and EFTs. As for the other services like options, futures, and OTC stock trades it charges an average commission. Furthermore, it has large listings of OTC stocks which would appeal to the penny brokers.
Moving on, the offerings on accounts are also ample and there is an account for everyone be it standard or a special. You can taxable IRA, Solo 401K, 529 plans, and plenty of other specialty accounts that cater to different businesses, investment clubs, and charitable trusts.
Thinkorswim is the trading platform that features professional design and has all the tools that expert investors can possibly demand. It provides access to advanced asset classes like futures, and forex in addition to other asset categories that are already on the web platform.
You can also customize the dashboard to a great extent. Users can add or remove alerts, portfolio builders, trade journals, AI assistants, and screeners among other things.
Furthermore, a paper trading option is also available which lets the users test their investment strategies to anticipate loss and profit. The programming language, ThinkScript is quite simple to learn which lets the users build their own analysis tools.
You can tailor-made these tools as per the trades of your liking. Although most brokerages offer it, the language of this Ameritrade is the easiest to learn.
Pros
- Premium educational material
- Highly qualified and skilled customer support
- Ample account offerings
- Branch offices in all parts of the US for detailed in-person guidance
- Zero commission on trades
- Bitcoin can be used for trades
Cons
- Expensive margin rates
- No fractional shares
5. TradeStation – Test Your Investment Strategies With a Powerful Simulation Tools
TradeStation was viewed as a broker for experienced and active investors with high net worth. But recently the company has made some changes to make it suitable for newcomers as well. It has removed the cap on minimum funding, introduced crypto, and launched a powerful trading platform called YouCanTrade.
Tools that were reserved for more experienced traders are now available to newcomers as well. It includes fast and reliable order execution, robust technical analysis, order entry, trade automation, and strategy development. On top of that, it boasts 99.999% uptime and represents industry-leading stability.
Furthermore, the platform offers commission-free stocks and ETF trades. The charges on other services are also competitive and quite reasonable. But the stand-out feature is that it allows crypto traders as well which is not common as far as a brokerage for penny stocks goes. Hence, if users ever try to give crypto ago, the platform would not restrict them in any way.
The simulation tool of the TradeStation is what all penny traders would appreciate. In such a risky market, there is no guarantee of profit but with this tool, you can minimize the losses by testing the different strategies. Trades take place on real-time market data which means the test results are as accurate as they can get in simulations.
The trading platform is loaded with tools and they are all integrated into the main platform. These include chart analysis, RadarScreen, Matrix, Time & Sale, and OptionStation Pro amongst many others. Another feature, Window Linking lets the users connect one window with multiple others based on common intervals and symbols. This allows you to research and execute orders much faster.
Pros
- Premium collection of tools
- Competitive pricing structure
- Reliable simulations based on real markets
- Excellent strategy development and automation
Cons
- A bit difficult to learn for beginners
- Too many tools can be intimidating
Bottom Line
Penny stocks are high-risk securities that demand credible brokers that can offer a suite of powerful tools to mitigate the loss and increase profit potential. You must also consider the amount of OTC stock listings to ensure there is a wide market where you place your bets.
We have enlisted some of the best brokers for penny stocks that meet the given criteria. Although it would be difficult to pick one that can serve all investors, Fidelity would be suitable for most. It has a simple fee structure and tools that can help professionals and newcomers alike. We hope this piece has been helpful. Thank you!
