Penny Stock Brokers: How to Choose The Best Penny Stock Broker

penny stock brokersThe idea of penny stocks can be appealing to anyone because of their price alone. Because they are so low in price per share, there is a large opportunity for gains.  However, this also makes penny stocks a risky investment.  Choosing the right penny stock broker will help you become a successful trader and investor.  There are plenty of penny stock brokers, both online and otherwise, and it can be difficult to choose the right one.  Let’s take a look at how you can choose a penny stock broker, some of the top penny stock brokers, and how to make sure you do not fall victim to a scam.

Best Penny Stock Brokers

Before we get into how to pick the right penny stock broker for you, let’s take a look at some of the best penny stock brokers out there that will allow you to both trade and invest in penny stocks.

  1. Suretrader:  Suretrader is a newer broker that offers a good value and a commission of only $4.95 for each trade.  Suretrader offers $1 options per contract and a minimum account deposit of $500.
  2. Interactive Brokers:  Interactive Brokers is more for traders and is considered to have one of the best professional trading platforms in the trading industry.  Interactive Brokers use a pay-per-share rate, in which customers pay $0.005 per share and have a $1 minimum per order with no maximum.
  3. Etrade:  Etrade is one of the largest discount brokerages in the trading industry, as well as one of the most popular.  Etrade allows you to set up a bank account and an IRA account and link them to your Etrade brokerage account for a same-day transfer of funds.  Etrade’s commission rate is $9.99 per trade.  However, for more active traders, the commission rate is $7.99 per trade.
  4. TradeMONSTER:  TradeMONSTER offers easy to use browser-based tools for option traders.  They had a virtual and paper trading account where customers can practice trading and playing with trading tools using $100,000 of virtual money.  Their commission rate is $7.50 per trade, and for penny stock trades, they will add $.0005 per share for any stock less than $1.00.
  5. Ameritrade:  Ameritrade is one of the most widely recognized and largest online stock brokers. They offer wonderful trading tools for both traders and investors.  Their commission is a flat-fee of $9.99 for each trade, and Ameritrade does not have any surcharges penny stocks, large orders, and extended-hours trading.

How to Pick A Penny Stock Broker

If you are looking for a penny stock broker, you probably want to get in on trading and investing in penny stocks.  Choosing a penny stock broker will depend on your individual needs and expectations.  There are a number of online penny stock brokers to choose from, so consider these 7 steps to help you determine which penny stock broker is the best fit for you.

Step 1: What are your needs?  Depending on what you are looking for, ask yourself a few questions.  Are you looking for customer service?  Do you need low trade commissions?  Maybe you are looking for a built-in steaming data feed.  By figuring out what you need from an online stock broker, you can better choose the penny stock broker that is right for you.

Step 2: Visit websites.  There are plenty of broker websites that you can check out online and search for details and deals that you are interested in.  For example: ChoiceTrade, Zecco, TDAmeritrade, E-Trade, Scottrade, or Tradeking are a few good suggestions to check out.  While visiting these sites, see what features brokers have to offer and if there are any discounts and special offers that you might be eligible for.  As with anything that you sign up for, make sure you read the fine print for any hidden fees or surcharges that are not mentioned in the overall message.  Try to determine for yourself if the price of the stocks are worth the terms of conditions.

Step 3: Read reviews.  When people use an online service, they are likely to leave some reviews and feedback about brokers that they might have worked with.  Once you find a penny stock broker that you might be interested in, search online for broker reviews as well as any other information pertaining to the broker.  The information that you find will help you better determine if the broker fits your needs.

Step 4:  Once you find the penny stock broker that fits your needs, you can head on over to their website and start on your application.  There is likely going to be several pages of information that you will need to fill out.  Be sure that you have enough time when you start to fill it out carefully and accurately.

Step 5: Fund your account appropriately.  Your application is going to have directions and instructions on how you should fund your account.  A popular way to transfer funds to and from is to use an ACH relationship with your bank account.  This will require that you have your bank account number and routing number handy and refer to your checks with these numbers on them.

Step 6:  Once you set up your transfer, you will need to wait for the money to clear and enter your new brokerage account.  You can look to wait anywhere between 3 to 5 days for the funds to clear for “non-marginable securities”.  This is the trading category that penny stocks will fall under.

Step 7:  Once everything is cleared, you can begin trading!

Things To Be Wary About

penny stock brokersNo matter what type of trading or investing you go into, it is always important to be wary.  As for penny stocks, they are known to be the victim of dishonest schemes and many fraudulent companies develop schemes to make money off of consumer gullibility.

  • Now how to read a balance sheet, income statement, and cash flow statement.
  • Know which stocks you should reject right off the bat.
  • Buy companies when they are a very low multiple on their cash flow.

Get Ready for the Ride

Dealing with penny stocks and finding the right penny stock broker will depend on a person’s style, financial situation, and trading preferences.  Once you open an account and buy your penny stocks, there is much more ahead of you in terms of buying and selling.  If you would like a step-by-step guide on trading and profiting from penny stocks, enroll in this survival guide to training to learn how to navigate through the exciting world of penny stock trading.