Are You Working With The Best Online Broker For Penny Stock Trading?
In our series covering penny stock trading, we’ve gone over several important things to consider when fining the best penny stocks to buy. We discussed some of the risks of trading penny stocks, some of the rewards of penny stock trading, and even some of the advanced details of what’s become known as OTC stocks. But what we haven’t gone over are some of the online brokers that allow investors to buy or sell penny stocks.
The fact that many of these small cap stocks are issued by small companies, penny stocks have a tendency to be incredibly volatile as we stated earlier in our series. This makes it tough for certain brokers to carry such securities due to the increased risk & the fact that though they may be easy to buy, limited market activity could may certain penny stocks hard to sell…and this is where it’s very important to pay attention to. If you can’t sell your stock, then there is really no way to make money on it in the market.
So what should you consider when finding the best online broker to trade penny stocks? First and foremost, the fees associated with trading stocks. Many brokers can charge upwards of $74 per trade depending on who you look at. Popular penny stock brokers like E*Trade or TDAmeritrade will charge anywhere from $5.99 to $9.99 per trade. This doesn’t mean to say that your trade is a buy and sell at once. This fee is paid first when you buy a penny stock and is paid when you sell a penny stock and totals around $12-$20 per full trade (a/k/a “around the world”). TradeKing, for example, goes further and actually tacks on 1 cent per share of stock valued under $2 on top of the company’s $4.95 commission, so be cognizant of this because if you’re trading sub penny stocks, you could be looking at millions of shares and even at $0.01 per share, you’re still talking an additional $10,000 per million shares (hypothetically speaking).
Other brokers will have volume restrictions on certain stock and this usually pertains to smaller brokerage houses. Even though some penny stocks can be traded at places like E*Trade or Scottrade, some brokers may not trade them because they lack daily volume or daily liquidity. Some brokers also limit the actual number of penny stock shares you can trade in one order or in a single day. This can actually force you to pay more commissions. Aside from the volume restrictions, a few companies that could be your penny stock broker. Some do not let their customers short penny stocks and some restrict access to certain penny stocks under a certain value.
Overall, some of the best penny stock brokers include companies like ETrade, OptionsXpress, TDAmeritrade, Charles Schwab, Merrill Edge, ChoiceTrade (which didn’t get rave reviews but does offer low commissions), and then there are boutique penny stock brokers that will let you view your account info online but in order to place a trade, you’ll still need to pick up the phone and speak with an actual broker. There’s definitely a lot involved and much to consider when choosing your penny stock broker. We’ll keep you updated along the way and suggest you read our last few articles on penny stock trading.