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Tom
March 1, 2017

The decision to invest in penny stocks has had a profound impact on my life. I was never somebody with cunning wit or extraordinary intelligence, so no one ever expected me to reach a level of success where they would end up envying me. All this changed with the decision to invest just a small sum of money. I am not going to promise you that you can become a millionaire overnight and this is a shortcut for all your unfulfilled desires, but from experience I can say one thing: if done properly, this will be one of the best decisions you have ever made.

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​Why Penny Stock Trading Online?

The best thing about penny stock trading is that you can do it online. If your brain is vigilant enough, then you do not need to do any physical labour to earn money. After all it is just a matter of how wisely you invest your money. There are plenty of online websites with easy-to-use platforms that will help you in accomplishing your online trading dreams. The trick is to pick the right one, and you will be on the right track.

Things you Need to Know

Before you start the hunt for the right penny stock websites, there are a few things that you need to know about yourself. Why you need to know these things? The answer is that when you are clear about the kind of investment that you are going to make, you will be in a better position to choose the investment options that suit your needs.

1. Trading Frequency

You need to ask yourself if you are leaping into this world for a one-time investment or you are looking forward to do it as a regular investment option. It is important to determine (or at least have an idea about) the frequency you will be looking to trade penny stocks online. Some websites will charge you money for being a member (even if you have been inactive) and others will reward you for more frequent trading. You should think about how often you will be trading when deciding the platform you will be using.

2. Risk You Are Willing To Take

Penny Stock Trading Sites

You are hoping to reap the benefits of trading outside the stock market and earning profits from it, so be ready to pay the cost: not everything is rosy about penny stock trading. The truth is that it is a risky investment and you won’t ever be certain of the outcome. No amount of research will safeguard you against any surprises or setbacks. However, doing thorough research will help to minimize your risk. The more knowledge the better in this game! So, before you set out to invest in a company, have a think about the magnitude of risk that you can afford to take on your investment.

3. Investment Amount

These are penny stocks we are talking about so the value of single stock doesn’t show much; before you start investing, it is wise to have an estimate about the number of stocks you can trade. The benefit of knowing the investment amount beforehand is that you will be in a better position to calculate the fees and extra amounts that you will paying on your investment. These fees can creep up on you in online penny stock trading, especially with frequent trading.

4. When Are You Going To Sell

Penny Stock Trading Sites

It is also an important consideration to think about when you will be looking to sell. Penny stocks are generally shorter term investments due to their volatile nature. If you are looking to make fast, short term trades you should know that it could be difficult to get rid of your holdings. Since you are dealing outside the stock exchange, and the scenario is volatile (to say the least), you might have trouble trading them for your desired price if you are not patient enough.

Due to the low levels of liquidity of penny stocks, it can be hard to find a buyer when you are ready to sell. This may force you to lower your price to get out – andyou’re your profits.

The Best Penny Stock Trading Sites

Now that you are all set to invest your money here, you must want to know where the big boys play so that you can join the league and become one of them in the future. To make life easier for you, I have compiled a list of the available options for penny stock sites so that you can pick the one that is best for you. I hope you will find the list handy and it helps you make the right choice.

Platform

Commission

Minimum Balance

E-Trade

$9.99/Trade

Yes - $500

OptionsXpress

$8.95/Trade

No

TD Ameritrade

$9.99/Trade

No

Charles SCHWAB

$8.95/Trade

Yes - $1,000

Interactive Brokers

$1/Trade

Yes - $10,000

Merrill Edge

$6.95/Trade

Yes - $25,000

Choice Trade

$7/Trade

No

1. E-Trade

Anyone who knows where to trade penny stocks must have heard about E-trade. It is one of the most renowned options in the online world for trading penny stocks. It has been reliable over the years and I have personally seen people do very well on this platform. Here is what makes it stand out from the crowd:

  • Flat trade pricing: E-Trade has adopted a flat trade pricing, so you do not have to worry about complex calculations as you invest more. You can calculate your costs with $9.99 per trade. Though this may look higher than competitors, in the long run what matters is that you know the costs involved and there are no hidden surprises. They have a pricing strategy that is tilted in favor of regular members; so if you trade frequently with them, you will experience price cuts and end up paying less.
  • Discounts available: If penny stock trading is what you are going to do then E-trade has discounts available. If you become a frequent trader on their website, they will offer you discounts according to their policy. Volume discounts are also a lucrative catch for regular investors.
  • Maintaining a minimum: However, if you are going to be a member of their website, you need to maintain a minimum account balance of $500 and cannot go below this threshold. If you have an Individual Retirement Account (IRA) then the stipulation of minimum balance is waived off for such an account.
  • Free initial trade: When you start investing with E-trade, you get another incentive in the form of 2 months of commission-free trade once you have made a deposit of $10,000 or more.
  • Variety of options: E-trade also has a large variety of investment options to help make your investing decisions easier.

2. OptionsXpress

  • Options Xpress is another good trading site for penny stocks and has a lot to offer for its members. Let me take you through their salient features:
  • Flat Commissions: Once again, the charm of this trading platform is that they charge flat commissions for trading over-the-counter stocks; so you can calculate the fees charged in advance before making any investments. The commission charged for investment is $8.95 per trade.
  • Diversity of Options: When you are looking for ideas on where to buy penny stocks, you need a range of investment services. OptionsXpress offers complete options trading and facilitates complex options strategies, including penny options.
  • No Threshold Balance: No current requirement for a minimum balance needed to keep an account.
  • Promotional Offers: If you make a deposit of $5,000 or more at Options Xpress, you get a promotional offer in the form of 50 commission-free trades.

3. TD Ameritrade

  • Dual Trading Platforms: This is one of the penny stock trading sites that have two trading platforms for investors. These strong trading platforms are web-based and are easy to use for beginners.
  • Flat commissions: Once again the bonus here is that you are charged flat commissions on your investments and there are no hidden fees. TD Ameritrade charges $9.99 per trade.
  • No Minimum Balance Required: There is no requirement for a minimum balance needed to maintain your account.
  • Promotions: You will receive cash bonuses when you make deposits with TD Ameritrade, this cash bonus can be used for future investments.

4. Charles SCHWAB

  • Two Trading Platforms: Two trading platforms available to all customers; one is a web-based based and the other one has advanced features. All platforms and tools are available free of charge.
  • Flat Rate: A flat rate of $8.95 is charged for each trade.
  • Minimum Balance Requirement: You will need to have a minimum balance of $1,000 in your account.
  • Promotional incentive: If you make a deposit of $100,000 or above with this penny stock site, you will be gifted 500 commission-free trades.

5. Interactive Brokers

  • Pricing structure: Their pricing structure is interesting: You can choose to pay 0.5% of trading value or you can decide to pay a fixed price between $0.005 and $0.0005 (this fixed price will depend on trading volume). So, you will have to do the maths based on the frequency you think you will be trading and the value of your trades.
  • Minimum balance: You will need to keep $10,000 as a minimum account balance with Interactive Brokers.
  • Access to shares: This broker is renowned for its support for almost every investment imaginable. Direct market access to stocks and futures gives them an edge.
  • Trading Platform: Their trading platform is designed with advanced technology and they have a good customer service.

6. Merrill Edge

  • Low Commission Rate: If low commission per trade is what you are looking for in a trading site for penny stocks then you may wish to opt for Merrill Edge. The commission rate per trade is just $6.95. There are no extra surcharges on an over-the-counter stock trade.
  • Minimum Balance Requirement: You need to have a minimum balance of $25,000 if you wish to trade.
  • Cash Incentive: Merrill Edge offers cash bonuses for the deposits you make with this penny stock trading site.
  • Stock Definition: They define a penny stock as anything below $1 (as opposed to others who define a penny stock as anything below $5).

7. Choice Trade

  • Flat commission: A commission rate of $7 per trade is charged. However, you will need to pay a 1% surcharge if your trade volume exceeds 500,000 shares.
  • Inactivity Fee: Although there is no account minimum requirement imposed, you need to maintain a minimum equity of $50,000 or you need to trade at least 5 times; if you fail to do so, you will charged $30 every quarter.
  • Paid platform: While platforms offered by competitors mentioned above are free, Choice Trade membership will cost you $14.95 every month to use their trading platform. In addition, you may also end up paying for other costs for data and research.

Nut shell

These are the top penny stock websites which offer very competitive services. As mentioned previously, you need to know how you want to approach trading before deciding where to trade penny stocks. These are all top notch penny stock trading sites and arenas where the big boys play. Take your time, weigh up your options, discuss with someone who is knowledgeable in this field and then make your final decision about where to buy your penny stocks.

I believe that E-Trade and OptionsXpress take the lead in terms of the best online trading site for penny stocks. Their charges are flat, their services are up-to-the-mark and promotional offers are tempting enough. E-Trade is a great option for both beginner investors and frequent traders. It is also very well known (largely due to the famous E-Trade baby commercial). OptionsXpress is great for futures and forex trading if this is something you would be interested in.

In case you were curious, here is the infamous ETrade 'Baby' Superbowl advertisement:

The next two options I would go for if the above two don’t resonate with you are TD Ameritrade and Charles SCHWAB. These platforms are quite good in terms of their promotional incentives and flat commission rates. TD Ameritrade and Charles SCHWAB are also great for beginner traders and for their research capabilities.

Interactive Broker should be considered due to its alternative pricing structure which may be of benefit to you if its suits your planned trading strategy. However, its platform can be quite advanced and may not be the best option for beginners.

If low commission fees is a big factor in your decision making process then you should consider both Merill Edge and Choice Trade as platforms to use. They have commission rates which are comparatively lower than the alternatives above.

Have a good think about your investment strategy. Once you have a solid idea of the approach you will be taking and your investment goals and objectives, you will be able to differentiate between the above options with ease. Finding the best site for trading penny stocks really does depend on your individual goals and requirements.

Remember not to let a couple of losses deter you from what can be an extremely profitable venture. Start small, do your research and most importantly; enjoy the process!

Happy trading!

Editor's Note

If you need some coaching on how to get your investment strategy down pat, it might be useful for you to sign up for a mentorship with someone who really knows his stuff. Jason Bond is an expert in the field and has made himself a millionaire several times over through sound investment techniques. His program have been verified to bring about excellent performance. Learn more about his mentorship program here.

About the author 

Tom

Tom is a former accountant turned entrepreneur. He is not a financial adviser but does tend to give a lot of financial advice to his friends and colleagues. He currently runs a small online venture and blogs about his research and experiences.

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