Penny Stock Brokers

If you intend to engage in buying penny stocks, then of course, you need to know where to buy penny stocks, specifically, which penny stock brokers provide the most appropriate service for your penny stock management. A penny stock broker is an invaluable resource when you embark on this endeavor so pay heed.

When dealing with penny stocks, you probably want to consider a discount stock broker for your penny stock broker. However, I’m mixing in a couple full service brokers so you can compare them against your needs. Select one of the following online stock brokers to learn more:

ChoiceTrade
Charles Schwab
Sharebuilder
LowTrades
optionsXpress
E*TRADE
TD Ameritrade
Vanguard
Interactive Brokers

ChoiceTrade

ChoiceTrade features a relatively simple commission structure: 5 bucks for all services! They charge $5.00 for each buy and sell order (whether a market or limit order). For those of us engaged in penny stock trading, it is only $5.00 for Pink Sheet and OTCBB stocks.

There is no minimum required balance to open a ChoiceTrade account, except if you desire to trade on margin or start a day trading account.

For traders who aren’t active on a daily basis, ChoiceTrade could provide the cheap stock service they require, with no inactivity or quarterly fee if you aren’t trading tens of thousands of shares each month.

ChoiceTrade

Charles Schwab

While Charles Schwab trailblazed for the world discount brokering, it still isn’t the least expensive of such services. Scwab charges $19.95 for both market and limit orders as well as an additional $0.015 for shares traded over 1000. Furthermore, Charles Schwab will charge you a quarterly service fee of $45.00.

Small-cap and penny stocks cost $19.95 for buy and sell orders, but if you buy over 5000 shares, you’re charged an additional. $0.003 per share.

Note that Schwab is a little more than a discount online penny stock broker, providing more in the way of tools and services for the serious investor.

Opening an account with Charles Schwab requires a minimum of $2500.

Charles Schwab

Sharebuilder

Sharebuilder, a newer online discount broker with some distinct traits. Sharebuilder CEO Jeff Seely desired to empower everyone to participate in online investing. Sharebuilder’s philosophy can be broken down to three core principles: Discipline, Diversification, and Dollar Cost Averaging.

Since ShareBuilder was bought by the giant world bank ING, Sharebuilder has sweetened its services with real-time buying penny stocks at $9.95.

The distinguishing service for Sharebuilder, however, is their Automatic Investment Plan, which allows customers to schedule dollar amount trades for each Tuesday and pay a commission of $4.00 or less. With no minimum fund limitations and no inactivity fees, opening a ShareBuilder account is a good idea whether you choose to use them as your primary online stock broker or not. You can make the most of their low fees for your long term investments.

Sharebuilder

LowTrades

Another very basic discount broker with low commisions is LowTrades. They offer very limited services for charting and researching, but they charge only $4.95 per trade. Outside of margin or day trading accounts, there is no minimum balance required.

However, they do charge inactivity fees for each half of the year. If you choose LowTrades, just make sure you execute at least one trade per six month period to avoid those inactivity fees.

LowTrades

optionsXpress

optionsXpress has been getting a lot of positive attention lately and is one of the more trendy online stock brokers. They charge $14.95 for limit or market orders of 1000 shares or less and if you trade enough, their fee for each order drops to $9.95 for 1000 shares. You’ll find no minimum balance to open an account with optionsXpress, unless you plan to trade on margin. Margin accounts require a deposit of $2000.

To buy and sell penny stocks or Over-the-Counter (OTC) shares, the fee structure is the same. You pay $14.95 for the first 1000 shares. The maximum you will be charged is 4 percent of the entire trade (this is for very large orders).

optionsXpress

E*TRADE

E*TRADE has one of the more established and well-known brand names in the online stock brokerage business. It is a cheap broker which benefits active traders not requiring support from customer service. E*TRADE will charge you $12.99 for both limit and market orders — with fees becoming even lower for large and active accounts — including penny stocks on the OTCBB or Pink Sheets. E*TRADE requires $1000 to open an account and E*TRADE assesses a $40.00 quarterly inactivity fee.

E*TRADE

TD Ameritrade

TDAmeritrade could be the best known of online stock brokers. TD Waterhouse and Ameritrade merged to make a single full service company, and the merger lead to significant improvements for penny stock traders. Post-merger they charge a flat fee of $9.99 for all limit and market orders regardless of the order size or stock price, and yes, this includes OTCBB and Pink Sheet penny stocks.

TD Ameritrade charges no activity or maintenance fees. In most cases there is a $2000 minimum funding level to open an account, but you may find lower funds advertised in occasional promotional offers.

Vanguard

Like Charles Schwab, Vanguard provides a more robust overall service. Thus they are not among the cheapest services listed here.

Vanguard will charge you $25 to execute any limit or market order. It assesses a $30 annual service fee for every client. They require a minimum opening balance of $3000. Buying penny stocks becomes a little more complicated, with a flat $20 base commission PLUS two percent of the total principal of your order.

Before coldly evaluating by their cost, however, remember they provide much more robust service for research, charting as well as more comprehensive customer service.

Vanguard

Interactive Brokers

Interactive Brokers charge $1.00 to trade 100 or fewer shares. When you trade more than 100 shares, the commission is $0.005 per share. So when you trade 1000 shares, it costs you $5.00.

While there is a minimum account balance of $2,000 to open an account with Interactive Brokers, this minimum balance jumps to $25,000 for day traders.

Correction and Clarification on this last point: An astute reader notes the following: “It is actually the SEC (Securities and Exchange Commission) that requires that amount to allow “pattern day trading” in a cash or margin account. All of the other brokers will also require it.”

Be sure to utilize your account (either for trades or research), because they will charge you an additional $10 a month if you’re inactive for that month.

Despite these extra charges, many people still like Interactive Brokers for buying penny stocks and OTCBB stocks. They charge only 0.2 percent of the total price of a penny stock trade. So when you buy 2000 shares of a 50 cent stock, the commission would be $2.00.

Interactive Brokers

I hope this provides you with a rough reference to online penny stock brokers to get you started in finding your penny stock broker. I’ve used all these services and they all performed fine; you basically have to decide how much research and operational assistance you’ll need along with how often you’ll be trading, then weigh your required profile of services against the costs of each to match your needs. For some, a discount stock broker will be all that is needed. But others may want to try a full service brokerage before trading on their own.

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