Top picks for penny stock brokers
The best broker for penny stocks - Fidelity
| Company |
Minimum Deposit |
Stock Trades |
Options (Per Contract) |
 Fidelity
|
$0.00 |
$0.00 |
$0.65 |
Why Fidelity is best for penny stocks: Fidelity is my top pick for the best broker for trading penny stocks due to its zero additional fees and excellent order execution. Unlike many brokers that charge extra for penny stock trades or refuse to trade them at all, Fidelity allows you to trade these low-cost shares without any hidden costs, making it perfect for active traders looking to minimize expenses. Plus, with Fidelity's reputation for offering some of the best price improvement in the industry, you'll often get better fills on your trades, which is crucial in the volatile penny stock market.
Another feature that really sets Fidelity apart for penny stock traders is its outstanding research tools and market commentary. Fidelity offers an impressive array of resources, from third-party stock reports to its well-organized Chart+ package, which allows for in-depth technical analysis. Whether you’re analyzing price patterns or keeping an eye on market trends, Fidelity’s research capabilities give you a significant edge when trading high-risk, low-priced stocks. With these tools at your disposal, Fidelity ensures penny stock traders have all the insights they need to make informed decisions.
Visit my Fidelity review to learn more about its full offering and cost structure.
Fidelity mobile app gallery
Fidelity stock research gallery
Best deep-discount pricing - Firstrade
| Company |
Minimum Deposit |
Stock Trades |
Options (Per Contract) |
 Firstrade
|
$0.00 |
$0.00 |
$0.00 |
Why Firstrade is best for deep-discount pricing: Firstrade, like Fidelity, offers zero-fee penny stock trading. While it doesn’t have the breadth of services of Fidelity (in my testing, I've found that few do), speculative investors may find Firstrade a great fit as it also doesn’t charge contract fees for options trading. In fact, as a deep-discount broker, Firstrade doesn’t charge fees on stock, ETF, mutual fund, or options trades, making it highly cost-effective for penny stock traders who often deal in large volumes of low-priced shares. Its easy-to-use mobile app allows traders to quickly access penny stocks, with solid charting tools that simplify market analysis. While its trading platform and educational resources may lag behind top competitors, Firstrade’s affordability and straightforward interface are ideal for penny stock traders, especially those with a focus on cost efficiency.
Firstrade also shines for its support of Chinese-speaking investors, offering extensive content in both Cantonese and Mandarin. This inclusive approach sets Firstrade apart, especially for Chinese-speaking traders looking to explore the penny stock market. With no account minimums, Firstrade offers a low barrier to entry, making it accessible for new investors wanting to test the waters in penny stocks without major upfront costs. Although its advanced tools may not cater to sophisticated traders, penny stock traders seeking an affordable, multilingual platform will find Firstrade an excellent option.
Check out my review of Firstrade to discover more about its platform and offerings.
Firstrade mobile app gallery
Firstrade stock research gallery
Best trading platform for penny stocks - Charles Schwab
| Company |
Minimum Deposit |
Stock Trades |
Options (Per Contract) |
 Charles Schwab
|
$0.00 |
$0.00 |
$0.65 |
Why Charles Schwab is the best trading platform for penny stocks: Charles Schwab offers the best platform for trading penny stocks now that its integration of TD Ameritrade’s thinkorswim platform is complete. Thinkorswim provides penny stock traders with cutting-edge charting tools and over 350 technical studies, which are essential for navigating the volatile world of low-priced stocks. The platform’s advanced features, such as customizable watchlists, make it ideal for active traders seeking to execute timely trades in the often fast-moving penny stock market. Schwab’s $6.95 OTC fee may seem higher than some competitors, but the combination of a platform perfect for active trading and comprehensive research tools might justify the cost for serious traders.
In addition to thinkorswim, Schwab’s mobile and browser platforms have been enhanced with trader-friendly features, offering penny stock traders seamless access anywhere with an internet connection. Schwab’s research library, which includes third-party reports and in-house analysis, equips traders with the information needed to evaluate high-risk penny stocks. While Schwab doesn’t offer some other volatile markets like cryptocurrencies, its focus on stock trading, coupled with its educational resources and live coaching, makes it a top choice for both beginner and experienced traders looking to capitalize on penny stock opportunities.
Visit my full review of Charles Schwab to read more about the thinkorswim platform and its various offerings.
Charles Schwab mobile app gallery
Charles Schwab stock research gallery
Penny stock fees comparison
FAQs
What are penny stocks?
I think of penny stocks as microcap companies with prices under $5 that only trade over the counter. That said, definitions of penny stocks vary. According to the U.S. Securities and Exchange Commission, or SEC, "penny stock" generally refers to a security issued by a very small company (i.e., micro-cap) that trades at less than $5 per share. Many trade for pennies per share (less than $1).
What’s the difference between penny stocks and OTC (over-the-counter) stocks?
There isn’t a universally accepted definition for penny stocks, but a popular definition is an over-the-counter stock that trades for $5 or less per share. Penny stocks are considered riskier than higher-priced OTC stocks because they are most likely cheap for good reasons, including failed business models, distressed financials or simply falling out of favor in the stock market.
Over-the-counter stocks trade between stock dealers instead of a stock exchange. OTC Markets Group has three tiers that each have different listing requirements, with OTCQX stocks meeting the most stringent requirements. OTCQB stocks are subject to less demanding standards and OTC Pink (named from the printed pink sheets the quotes used to be printed on) has the most lax standards.
What are the pros and cons of trading penny stocks?
One of the key advantages of trading penny stocks is the potential for finding undervalued opportunities. Since small companies are rarely followed by major analysts or institutional investors, astute individual traders can identify stocks that may be overlooked. I’ve seen cases where the illiquidity of these stocks means they trade at a discount to their true value, giving savvy investors a chance to capitalize on price inefficiencies. For those willing to research and take on some risk, penny stocks offer the allure of high returns from small investments.
However, penny stocks come with significant risks. They’re often targeted by fraudulent schemes, such as pump-and-dump scams, which can result in substantial losses for unsuspecting investors. In my experience, the wide bid-ask spreads typical of penny stocks make exiting a position more expensive, cutting into potential profits. Additionally, these companies usually provide limited financial disclosure and face less regulatory oversight, which means traders often lack the reliable information needed to make informed decisions.
How much does it cost to trade penny stocks?
The cost of trading penny stocks depends on the online broker you use. If you use a broker that offers flat-fee trades instead of per-share rates, trading penny stocks is not expensive; some brokers even extend their free stock trading policy to include penny stocks. We also recommend avoiding brokers that charge a monthly platform fee, data fees, or monthly minimums, as those costs quickly add up.
Example 1 (flat-fee): Charles Schwab charges a flat-rate $6.95 per OTC trade, while Fidelity charges $0 (no charge). Thus, your cost to buy OTC shares is just $6.95 and $0, respectively.
Example 2 (per share): Interactive Brokers charges $.0035 per share with a max cost of 0.5% of the trade value. You buy 20,000 shares of penny stock XYZ at a price of $.13 per share ($2,600). 20,000 shares x $.0035 per share is $70, while $2,600 x .5% is $13. Thus, your cost to buy the shares is $13 (0.5% of trade value).
How do you buy penny stocks?
For beginners who want to buy penny stocks, the following checklist can help improve your experience buying and trading.
- Choose a reputable broker: Pick a trustworthy firm to open an online brokerage account.
- Analyze details: Research the penny stocks you are considering as much as possible, which will probably be difficult given the lack of reporting required by OTC exchanges.
- Don’t get scammed: Avoid penny stocks that are susceptible to market manipulation such as those targeted by "pump-and-dump" schemes, or that you may have heard about on online forums and in chat groups.
Who is the best penny stock broker?
The best penny stock broker is Fidelity due to its zero-commission OTC trades and exceptional order execution. Unlike many brokers that charge additional fees for penny stocks, Fidelity allows you to trade these low-priced shares without hidden costs, which is crucial for minimizing expenses in the volatile penny stock market. I’ve found that Fidelity also offers some of the best price improvement in the industry, often securing better fills for your trades, a significant advantage when every cent counts in penny stock trading. With its first-rate research tools and technical analysis capabilities, Fidelity is my top choice for traders looking to succeed in penny stocks.
Can you make money with penny stocks?
Yes, you can make money on penny stocks, just as you can with any stock. Penny stocks carry more risk because they are less liquid and often the target of investing scams. However, as in many markets in the financial world, high risk can sometimes offer high rewards. Do careful research before investing in a penny stock. And, before you day trade penny stocks, read our take on why most investors may wish to avoid day trading.
Our Research
Why you should trust us
Sam Levine, CFA, CMT, formerly a lead writer for StockBrokers.com, has over 30 years of investing experience and actively trades stocks, ETFs, options, futures, and options on futures. He's held roles as a portfolio manager, financial consultant, investment strategist and journalist. He holds the Chartered Financial Analyst (CFA) and the Chartered Market Technician (CMT) designations and served on the board of directors of the CMT Association.
Blain Reinkensmeyer, head of research at StockBrokers.com, has been investing and trading for over 25 years. After having placed over 2,000 trades in his late teens and early 20s, he became one of the first in digital media to review online brokerages. Blain created the original scoring rubric for StockBrokers.com and oversees all testing and rating methodologies.
For this guide:
- Whenever possible, we used our own brokerage accounts for testing. For several brokers, we used a test account that was provided to us.
- We collected nearly 3,400 data points in total.
- We tested each online broker's website, browser-based trading platform (where applicable), downloadable desktop trading platform (where applicable), and of course, the mobile app (or apps in the case of several brokers).
- We met with the product teams of nine online brokers.
How we tested
Our research team meticulously collected data on features with particular importance to penny stock traders, such as trading costs, availability of flat-fee trades, ease of platform and app use, and resources for researching a stock. Our screening process eliminated any broker that does not permit trading penny stocks or aggressively restricts those trades. All research, writing and data collection at StockBrokers.com is done by humans, for humans. Read our generative AI policy here.
StockBrokers.com uses a variety of computing devices to evaluate trading platforms. Our reviews were conducted using the following devices: iPhone 12 Pro, iPhone 15 Pro Max, MacBook Pro M1 with 8 GB RAM running the current MacOS, and a Dell Vostro 5402 laptop i5 with 8 GB RAM running Windows 11 Pro. In testing platforms and apps, our reviewers place actual trades for a variety of instruments.
As part of our data check process, we sent a data profile link to each broker summarizing the data we had on file and the data they provided us last year, with a field for entering any data that had since changed. For the brokers that filled out these profiles, we audited the information for any discrepancies between our data and the broker’s data to ensure accuracy.
As part of our review process, all brokers had the opportunity to provide updates and key milestones in a live meeting that took place in the fall. Meetings with broker teams also took place throughout the year as new products rolled out. Insights gathered from these calls helped steer our testing efforts to ensure every feature and tool was assessed.
Trading platforms tested
We tested 17 online trading platforms for this guide:
Fidelity
Merrill Edge
E*TRADE
TradeStation
Interactive Brokers
Charles Schwab
tastytrade
eToro
