Benzinga readers often choose Interactive Brokers or Robinhood as the best penny stock brokers.
Retail investors can invest in all types of markets, including penny stocks. Penny stocks are shares that trade below $5 and can be valued as low as a few pennies per share. They allow investors to hold thousands of shares for a small amount of capital, but while that may sound attractive, these stocks can be considered high risk. That's why advice on the best online broker for penny stocks can help.
Many penny stocks are traded over the counter (OTC) as they do not meet specific requirements for major stock exchanges. With a lack of regulatory requirements and increased risk, finding the right online brokers for penny stocks is crucial for penny stock investors to choose.
Quick Look: Best Online Brokers for Penny Stocks
- Best for Active and Global Traders: Interactive Brokers
- Best for Beginners: Robinhood
- Best for Intermediate Traders and Investors: Webull
- Best for Demo Accounts: eToro
- Best for Long-Term Investors: Magnifi
- Best for Short Selling Over $25k: Cobra Trading
- Best for Options Trading: TD Ameritrade
- Best for Futures Trading: TradeStation
8 Best Penny Stock Brokers
It can be challenging to find the right stockbrokers. Here is a list of Benzinga’s favorite penny stock trading platforms and information about what they offer to help you decide where to buy penny stock online.
1. Best for Active and Global Traders: Interactive Brokers
Interactive Brokers is a well-recognized platform for penny stock trading online that can be beneficial for trading penny stocks. Before you can trade these stocks, you must request penny stock trading permission via the platform. In addition, the firm charges a commission for trading penny stocks.
Pros
- IBKR offers the trading power and leverage required to make the most of penny stock trades.
- The wealth of information provided by IBKR makes it easier for even experienced traders to learn precisely what they are investing in.
Cons
- Permission is required to invest in penny stocks
- Commission charges
2. Best for Beginners: Robinhood
Robinhood Markets Inc. (NASDAQ: HOOD) is a well-known broker championed by many retail customers as one of the best online brokers for penny stocks. The commission-free broker is designed for new traders, while its online app is designed primarily to be easy to use. The downside of Robinhood is that it does not offer OTC stocks. The only penny stocks provided are those listed on the Nasdaq exchange or the New York Stock Exchange (NYSE).
Pros
- Robinhood is commission-free so you can save money on these trades, especially if you’re new to investing.
- Robinhood adds offerings to its platform relatively often, meaning that you can move all your investments to this platform with ease.
- Because the platform is designed mostly for new traders, it’s easier to learn the “what, why and how” with Robinhood.
Cons
- Robinhood does not offer OTC stocks for trading, which can make investing in penny stocks difficult, especially when these companies are still up-and-coming.
3. Best for Intermediate Traders and Investors: Webull
Webull’s platform for penny stock trading online offers up to 4x day-trade buying power and 2x overnight buying power with a margin account. With technical indicators, economic calendars and ratings, the platform is designed for intermediate and experienced traders. It charges an annual margin rate from 6.99% to 3.99% and requires no minimum deposit. Webull does not charge commission fees.
Pros
- Because you pay no commission and have no minimum deposit, you can start with just the cash in your wallet as you begin building a portfolio.
- Webull allows you to take more buying power both overnight and during the day, meaning that you don’t need to exit positions at the end of the day.
- Experienced traders can easily get into this platform and leverage their experience in the markets to make the most of penny stock trades.
Cons
- Margin rates may seem high for traders who are trying to volume trade on relatively inexpensive assets.
4. Best for Demo Accounts: eToro
eToros securities trading offered by eToro Securities, Inc, (“the BD”), member of FINRA and SIPC. Investing involves risk.
eToro allows you to invest in cryptocurrencies and exchange-traded funds (ETFs), but it’s also a great place to invest in stocks or trade penny stocks online. While adding stocks to your portfolio, you can watch your net worth grow and build wealth for the future while using a broker that consistently ranks as one of the best online brokers for penny stocks.
While penny stocks will not make you rich all on their own, it helps to use a platform that helps you create a more diverse portfolio. eToro also allows you to:
- Invest in full stocks or fractionals for as little as $10 – perfect for penny stocks
- Engage with experienced, real investors regarding strategies
- Mix your crypto holdings with stocks and ETFs
- Review detailed charts, indicators and analyses
- Pay zero commissions
Pros
- You can start investing with as little as $10, meaning that this might also be a place where students can start investing if they plan to start small.
- eToro allows you to mix all your assets into one portfolio, meaning that you could create a portfolio consisting of nothing but affordable assets like penny stocks.
- Because there are social trading options and information on the site, it’s much easier to research and “learn on the job.”
Cons
- Even though eToro has a robust website, it might be confusing to be confronted with several different asset types that fall outside of the penny stock sector.
5. Best for Long-Term Investors: Magnifi
Magnifi is a marketplace that allows you to use common brokerage tools and AI to make the best decisions for your portfolio. Because you can pull up all the information you need on a given asset, you can easily invest in the assets that will give you the results you deserve and better match your strategy. Search for the investment options that meet your needs, invest in specific categories or scan for assets in a price range that’s affordable for you.
As one of the best online brokerage for penny stocks, Magnifi is generally best for long-term investors and those who require a bit of client support, you can also learn more about investing from this platform, use the AI-powered investing assistant, enjoy commission-free investing, try the mobile app and take advantage of over 15,000 possible investment options. This makes Magnifi a good place to trade for seasoned and novice traders to access penny stocks.
Pros
- You can easily look for assets in your price range so that you can remain on budget.
- Information is tied to each asset and is easy to read as you research on the platform.
- The large number of assets helps you fill your portfolio without opening accounts elsewhere.
Cons
- Even though the site is designed for novice and experienced investors, it may not offer enough tools for volume traders.
6. Best for Short Selling Over $25k: Cobra Trading
Cobra Trading, a direct access broker, is an excellent platform to trade penny stocks online or to buy penny stocks online, including OTC stocks. Fees are low, and it offers discounts for high-volume traders. However, all trades are charged a $1 minimum commission.
Pros
- Cobra is a direct access broker that makes it easier to uncover information on the assets in which you choose to invest.
- High-volume traders, like those buying into penny stocks, can qualify for discounts on their fees.
- The $1 minimum commission is extremely low for the industry.
Cons
- Cobra only offers accounts to those trading with over $25,000, meaning it can be difficult to fill a portfolio with penny stocks.
7. Best for Options Trading: TD Ameritrade
TD Ameritrade (owned by Schwab) is a great online trading platform for buying penny stocks online. The company is commission-free with no platform fees, no data fees and no trade minimums. For OTC Bulletin Board (OTCBB) stocks, there is a $6.95 per trade fee. TD Ameritrade has a user-friendly website that is easy to navigate.
Pros
- The lack of data fees, trade minimums and platform fees makes the platform far more affordable for volume traders.
- Trading on the website is much easier than it is with other platforms.
- The platform offers you access to all the stocks and assets that you could want.
Cons
- Penny stocks are often traded OTC, and there is a large fee per trade for these transactions.
8. Best for Futures Trading: TradeStation
TradeStation does not charge a fee for stocks or to trade penny stock online, but this benefit only applies to the first 10,000 shares per trade. Both of its mobile apps offer commission-free penny stock trading. In addition, depending on the account you set up, there is a minimum deposit for its TS Select account of $2,000 which allows you to buy penny stocks online easily.
Pros
- No fees for penny stock trades when you are a volume trader, which can be helpful as penny stocks are so much more affordable.
- The mobile app makes it easier for traders to jump between the desktop and mobile app, depending on your daily schedule.
Cons
- TS Select minimum deposits are relatively high, considering the relatively low fees for volume trades.
Why Do You Need a Penny Stock Broker?
The importance of a good broker cannot be underestimated — finding one that is safe and reliable is vital; that is where the list of best online brokers for penny stocks comes in. Penny stocks must satisfy a list of requirements to join major exchanges, and, therefore, most are traded OTC.
Fee structures and commissions vary depending on the broker you choose, and, because of the low liquidity of penny stocks, bid-ask spreads will also be determined by the different brokers and stocks. Make sure the broker is regulated and suits your requirements. In addition, some penny stock brokers offer additional benefits and education that can benefit everyone. An important point to note is that you must research the broker beforehand.
How Do You Choose a Penny Stock Broker?
Choosing a penny stock broker can be a long process because of the vast choice of brokers on offer. However, the steps below can help you speed up the process.
Select a Broker
Different brokers have varying requirements for signing up, depositing, and withdrawing. The assets it allows you to trade also vary. As penny stocks are usually traded OTC, check if the broker offers the stocks you are interested in.
Most importantly, ensure that the broker is regulated in your region before buying penny stocks online.
Research Fees
When buying or selling stocks, you may face fees. Even if the broker says it is commission-free, other costs might be associated with using the broker, so investigate potential hidden charges. If the broker does charge a commission, it can impact potential profits, so consider them as well.
Flat fees are better when purchasing a large amount of shares as this is set at a fixed price and does not depend on the amount you buy, which can impact your bottom line if you trade large positions.
Spreads can change and be high because of a lack of liquidity in some penny stocks. The small market capitalization and low liquidity of many penny stocks mean brokers have a large spread.
Seek Strong Security and Avoid Scams
You should analyze individual penny stocks and conduct thorough research as there can be many scams that promise low costs and high returns. Make sure you avoid this situation by only trading with a broker you can trust and understand the company you are investing in.
The Qualities of a Good Penny Stock Broker
Choosing the best online penny stock trading opportunities requires careful research. The qualities of a good penny stock broker to trade penny stock online involve many factors. Once you have found a list of safe and regulated brokers, look at each in a more detailed fashion.
- Easy navigation: A user-friendly platform might not seem important, but you’ll save yourself a lot of hassle in the long run if you choose a stockbroker with this characteristic. Look for a platform that allows you to enter and exit trades quickly, manage your portfolio and answer any questions or problems you have. A user-friendly platform is easier to manage and can save a lot of future headaches.
- Technical tools: Analysis and research are vital to traders and investors. Additional technical analysis tools can help you learn more and test and implement new trading strategies. Not everyone uses technical analysis, but having various indicators available can significantly benefit those who do.
- Large selection of stocks with cheap fees: If you are interested in trading penny stocks, a quality to look for is a broker with numerous penny stocks to choose from, with low fees.
- Outside access: A helpful addition can be linking external platforms to the brokerage, making managing your portfolio, charts and additional research more accessible. This quality can be important when managing an extensive portfolio.
Penny Stocks are Risky
Investors should be aware that penny stocks can be high risk. However, with high risk comes the potential for high reward because of the number of shares you can purchase at a low price. Be aware of an increased chance of failure from the highly volatile nature and lack of liquidity. If you trade penny stocks, you at least want to make sure you have a broker you can rely on. Want more penny stock help? Find the best tech penny stocks, the best high-volume penny stocks or the best penny stock trading apps here.
Frequently Asked Questions
Can you get rich investing in penny stocks?
Individuals can make money when investing in penny stocks, but it requires heavy research and understanding of the stock. You face an increased chance of losing money when trading penny stocks.
Is penny stock trading legal?
Like any other market, penny stock trading can be traded on many platforms and is completely legal.
Is investing in penny stocks risky?
Investing in penny stocks can be risky, but the potential rewards are also high.
What is the best broker for penny stocks?
The best online broker for penny stocks depends on your investment goals. You can find eight options above with a detailed review of why Benzinga thinks they’re some of the best online brokers for penny stocks.
How do I find good penny stocks?
You can find penny stocks by category, by researching companies or by checking the best penny stocks here. It’s updated daily.
Is penny trading profitable?
Yes, trading penny stocks can be profitable. Like any investment, it comes with risks but also the potential for high rewards.
About Alison Plaut
Alison Plaut is a personal finance and investing writer with a sustainable MBA, passionate about helping people learn more about sustainable investing and long-term wealth building for financial freedom. She has more than 17 years of writing experience, focused on investments, business, personal finance, and real estate. Her work has been published in The Motley Fool, MoneyLion, and regularly appears on Benzinga.