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Best Online Brokers for Penny Stock Trading

Updated on 2012-09-28 by Guest

Technology has been doing wonders lately; and online trading is gaining traction simply because of it. With the onslaught of many online brokers these days, the challenge is to wade through the list of brokers and choose the best online brokers for penny stock trading.

Choosing the best brokers is pretty much like choosing a home or a car – we all have different tastes and our choice of brokers must be suitable for our trading styles and personality. With that said, however, it is important to note that choosing the right broker can spell the difference between success and failure in penny stock trading.

Criteria in Choosing the Best Online Brokers

Personal criteria for choosing the best broker may significantly vary for different traders. But if you want to maximize your trading profits, it's best to keep the following considerations in mind:

Low Commission and No Additional Fees

You would want to pay the lowest commission fees possible to maximize returns. Most online brokers are very upfront with their trading fees. However, the devil is in the details since there are brokers that are very adept at hiding additional charges. You would need to peruse through those almost microscopic terms and conditions to look for additional charges like maintenance fees or additional fees for trades that goes beyond the share limit. Personally, I consider total brokerage fees above $10 as too high since there are many brokers that can offer cheaper option.

Minimum Balance

Another thing which you may also want to look into is the minimum balance required by online brokers. Different brokers vary on this; some doesn't require any minimum balance while other brokers require $500 - $2500 minimum balance.

Customer Service

Customer service is one of the criteria which can't be easily measured quantitatively. However, this is just as important criteria in choosing the best online broker for penny stock trading. Quality customer service from your online broker would contribute a lot to the overall trading experience.

Paper Trading and Other Nifty Trading Tools

We've heard the cliché “practice makes perfect”. In the case of trading, practice is also very much needed. That's why it would be to your advantage if your online broker allows you to paper trade so you can practice trading or devise and test a strategy without the risk of losing real money. Furthermore, you also need to consider the tools that the online brokers offer their clients for free.

Popular Penny Stock Brokers

Below is a list of popular online brokers.  Using the different criteria mentioned above and some other criteria of your own, you can take your pick on the best online broker for you.


 Zecco offers one of the lowest trading fees online at just $4.95/trade. However, upon closer inspection, you would learn that they charge considerably higher fees for penny stock trading at $6.95/trade. There is no minimum balance required to open a non-margin account. This online broker also offers state-of-the-art tools for traders including a paper trading platform.


 OptionsHouse charges one of the lowest fees at $3.95/trade. They also have a   virtual trading platform that lets you hone your trading chops. However, the downside with this online broker is that it charges additional fee of $0.005/share of stocks priced lower than $2.00. Additionally, they require $1,000 minimum balance to open cash account and $2,000 to open a margin account.


 If low fees is high on your list of priority in choosing the best online brokers for penny stock trading, Just2trade would definitely make the cut. With a rate of $2.50/trade, Just2Trade has the lowest fee on the market. The only downside to using this online broker is its $2,500 minimum balance requirement.  If your account drops below $2,500, you won't incur charges but you won't be able to access your account unless you raise your equity to $2,500.


 Scottrade is one of those online brokers that are very upfront with their fees. They charge $7/trade; however, they do charge an additional 0.5% principal for over the counter (OTC) stocks. The minimum balance required to open an account with this broker is $500.

Choice TradeChoiceTrade

 This online broker charges $5/trade for stocks; however, they charge an additional $2 for penny stocks trading. So that means that you'll be charged $7/trade for OTC or pink sheet stocks. The good point of this broker is that they don't require minimum balance to open an account and they offer free demo on their website.

Charles SchwabCharles Schwab
 Charles Schwab is a pioneer of discount online brokerages. For this reason, it's worth a mention in this list though their fees certainly wouldn't make it to the list of brokers that charges the cheapest fee. They charge a flat rate of $8.95/trade. However, they charge an additional $50 charge for trading foreign shares in US over-the-counter (OTC) market that do not settle in the US. Charles Schwab offers a wealth of tools for traders and they have a wide array of investment vehicles for traders who want to diversify their portfolio. They have a $1,000 minimum balance requirement.


 E*Trade is one of the popular online broker around. It offers many investment or trading instruments as well. They charge $9.99/trade fee. If you execute 150 or more trades in a quarter, you're eligible for the $7.99 fee per trade. The downside to using this broker is that you will have to pay $40/quarter in inactivity fees if you don't make a single trade in a quarter. Furthermore, they require $2,000 minimum balance.

TD AmeritradeTD Ameritrade

 TD Ameritrade does not charge maintenance or inactivity fees. Additionally, they offer up to 60 days of free trades. That should be enough time for traders to get the hang of their tools and interface without paying any fee. However, after that special offer, they charge $9.99/trade. You would need to fund your account with at least $2,000 minimum balance.

When it comes to selecting the best online brokers for penny stock trading, it's different strokes for different folks. What's most important is that you choose online brokers that are favorable to your trading needs, account size; and which serves the bottom line - maximizing profits and returns.

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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.