Best Stock Brokers for Penny Stock Traders
What To Look for in a Penny Stock Broker
To trade stocks, you will need a broker. The money you deposit with them can be used to buy and sell shares.
The process of setting up an online account is simple, and you'll be up and running quickly. Each trade you make will result in a very small fee, called a commission, to be charged by your broker.
The best broker for you will be different from which is best for someone else. For example, some discount brokers are great for trading blue chip shares like IBM and GE.
Certain ones are best for individuals with hundreds of thousands of dollars to trade, while some are great for people who only make a few trades in an entire year. Other brokers are more suited to traders with only a few hundred dollars to invest; who trade frequently; who buy and sell penny stocks.
The latest iteration of The Official Discount Broker Review is a great place to start. Our team called all the companies, e-mailed them, reviewed their policies and rates, examined their online platforms, and collected customer opinions. If you already have a stock broker, take a look to see how they rank.
Identifying a Broker
Identifying the top brokers is simple. Finding the best ones specifically for penny stock traders is a bit more involved. It is because some online services will not trade penny stocks at all! Others add additional fees and rules onto buying and selling low-priced shares (which for some brokers are considered shares trading at less than $1, while for others it applies to anything priced at less than $5).
Typically (but not always), penny stock investors have small amounts with which to start, make many trades per month, and are new or inexperienced investors. Based on that example, the best discount broker for a penny stock trader would be one which has:
- very low commission fees
- no minimum amount required to open an account
- clear tutorial articles and tools
- excellent customer service
However, if you are a brand new investor in penny stocks, you might not even want to be getting a broker just yet. I always recommend starting by Paper Trading, which has no risk and requires absolutely no money. There should be no rush to get into the markets until you are confident you can do it right!
When ready to start trading for real, you need to consider which features are the most important. Most of the major considerations involve:
- Fees/commission rates
- customer support
- online trading platforms
- investor tools
- minimum amounts required
- number of clients
- years in business
Before you commit, call a few brokers. Send them a couple of e-mails as well. Just by the speed, professionalism, and helpfulness of their response, you may know which will be the best choice for you.
The old expression says, "measure twice, cut once." It is just as true in the stock market as in any other aspect of life, and it becomes even more significant when talking about low-priced, volatile, speculative shares!