Best Penny Stock Brokers For Trading & Investing In 2021 - Marathon Digital Holdings (NASDAQ:MARA), GameStop (NYSE:GME)

Looking for Penny Stocks to Buy But Don't Know Where to Start?

If you're looking for penny stocks to buy but don't know where to start, you're probably not alone. In 2021, the place to start is with an online broker. Like anything, investors should know the pros and cons of each penny stock brokerage platform.

While some may be geared more toward short-term trades, others could be better for longer-term investing. At PennyStocks.com, we're always searching for top trends in the stock market today. Often we get asked, how can I buy penny stocks? It may seem straightforward at first, but not all penny stocks can be traded on every brokerage platform.

What Are Penny Stocks?

Let’s go over some basics. The first question to answer: what are penny stocks? These are defined as stocks that investors can buy for less than $5 per share. Some traders may have their own definition of penny stocks. But according to the Securities & Exchange Commission, this is the framework it goes by.

These can be listed on major exchanges like the New York Stock Exchange and NASDAQ. Many are also considered OTC Penny stocks because shares trade “over the counter.” Something to note about the OTC, companies aren’t required to abide by the strict reporting requirements of the NYSE or NASDAQ exchanges. This can make it difficult to find current or transparent information. For that reason, OTC penny stocks are typically higher risk.

In 2021, brokerages like Robinhood and WeBull have seen massive rises in popularity. And while these brokerages may be good for some traders, they often won't allow for OTC trading. This means that traders are unable to trade the almost 10,000 publicly traded companies on the OTC market.

Also, some brokerages will have high fees per trade, while others will have zero commission trading. To be the best trader you can be, it's important to have the right tools at your disposal. Let's take a look at some of the top penny stock brokers in 2021.

Best Online Brokers for Trading Penny Stocks In 2021

With any broker, there are three things that investors need to consider.

How much is it per trade?
- Big-name brokers will often charge a fee ranging from $5-$15 per trade. This may seem small at first, but it can add up very quickly if you’re swing trading.
How often are you going to be trading?
- If you plan to trade, whether that be hourly, daily, or weekly, fees can accrue quickly. On the other hand, if you are buying and holding for the long-term, these fees may not be a big deal.
What features do you need?
- Are you a pro that requires access to all types of technical indicators, charts, and research? Or, are you just looking to buy and sell on a frequent or infrequent basis, without the need for these tools? This is important to consider as picking a broker is essentially paying for a service.

With this in mind, here are some of the top brokers for investing or day trading in 2021 and their pros & cons. Which broker is best for penny stocks? That’s something you can decide after checking out some of these.

Best Penny Stock Brokers In 2021 #1: Interactive Brokers

Interactive Brokers is considered a very versatile trading platform. In addition to trading U.S.-listed stocks, Interactive Brokers also allows investors to trade in European and Canadian markets. This is something that not a lot of brokerages offer to U.S. investors.

For U.S. stocks and ETFs, Interactive Brokers charges $0 on those who have a Lite account. If you choose the Pro account with access to faster trades, the fee will increase to $0.47 per 100 shares.

Interactive Brokers also offers a flagship desktop platform known as Trader Workstation. It also has a mobile platform known as IBKR Mobile, which allows for trading from a smartphone. While Interactive Brokers may not be the most well-known brokerage, it could be worth considering for some, especially if access to international markets is something of interest.

2. E-Trade

E-Trade is one of the largest and most popular trading platforms out there. It offers investors a very straightforward solution for investing or day trading penny stocks on all major U.S. exchanges and the OTC.

In addition to the tools on its website, it also has a well-known platform known as Power E-Trade. While in the past, trading had a flat fee, E-Trade now competes with no-commission platforms like Robinhood by offering $0 in commissions for online stock, ETF, and options trades. However, the $0 commission does not apply to Over-the-Counter, foreign stock transactions, large block transactions requiring special handling, transaction-fee mutual funds, futures, or fixed-income investments. Furthermore, despite there being no “trade fee,” there is a “contract fee” of $0.50-$0.65 on options depending on how many trades are made per quarter.

Formed in the early 80s, E-Trade has become one of the most well-known brokerages globally, and for a good reason. It offers two mobile applications as well as the more pro-minded platform mentioned above. One thing to consider is that E-Trade may not be the best option for beginners.

While some platforms may have educational tools to help beginner traders, E-Trade essentially assumes you have at least a small amount of experience. For those who trade regularly, E-Trade's powerful tools and access to fast trading means that it could be a valuable asset.

3. TD Ameritrade/Charles Schwab

Similar to E-Trade, TD Ameritrade is an institution for trading in the U.S. Last year, Schwab took over TD in a $26 billion deal, making the pair a major competitor in the broker market. In fact, if you look at some of the penny stock brokerage growth stats for 2020, this merger produced one of the largest client bases among major firms. TD Ameritrade offers investors $0 trades for listed stocks, a slew of trading platforms, and high-quality market research tools.

One of the aspects that separate TD Ameritrade from the rest is its education and research tools. It offers a platform known as Think or Swim that many high-tier investors use every day. Additionally, TD Ameritrade also allows traders to trade on the go with several mobile apps with high functionality.

Is TD Ameritrade good for penny stocks? One of the downsides is when it comes to OTC penny stocks. A $6.95 commission applies to online trades with OTCs. Like ETrade, there is also a contract fee for options trading ($0.65 per contract).

4. Robinhood

While some traders may have a sour taste from Robinhood's trading halt that occurred with GameStop GME a few months ago, it still offers one of the most intuitive platforms out there. Robinhood has risen in popularity in the past three years or so as a broker for retail investors.

While it began as a platform for beginners, Robinhood has evolved and now offers a wide breadth of tools for investors to use. If you pay a small fee per month for Robinhood Gold, you can get access to Level 2 trading data. This is a major plus for those looking to make multiple trades in penny stocks per day.

Additionally, Robinhood offers fast execution and a straightforward mobile trading platform. This has become one of the sticking points for clients of Robinhood. Even if they wanted to leave for another platform, few offer a simplistic approach to hitting 1 button to buy penny stocks and 1 to sell them. There aren’t many technical trading tools to cloud the front-end user experience of the app either.

[Learn More] How To Buy Penny Stocks On Robinhood

The major downside for penny stock traders here is that Robinhood does not allow access to trade most OTC penny stocks. There are very few instances where the platform allows access. For instance, as of this article, shares of Rolls-Royce RYCEY are available for purchase on the app. This is a rare case of OTC penny stocks on Robinhood.

In general, the lack of access to the OTC market could be a major turn-off for some. On the other hand, Robinhood has no minimum account requirements, which could be a positive for those in the early stages of their trading career. It's important to consider the other factors mentioned above as well.

5. Fidelity

Fidelity is another classic broker that has been around for many years. One of the major benefits of Fidelity is its educational tools. It offers these via both desktop and mobile platforms, which also have high usability for trading. Many consider Fidelity to be one of the most intuitive and usable platforms out there.

This makes it a winner for those who are just starting. Fidelity offers its Active Trader Pro desktop platform geared toward day trading for those who are more experienced. Additionally, it offers no commissions for trading U.S. stocks, ETFs, and options.

Also of note is that Fidelity can be a benefit to those who have large sums of cash in an account but not in the market. It offers a cash sweep option on approved accounts which allows investors access to its Government Money Market Fund 7-Day Yield, among others. This has an interest percentage of 1.25% which is more than most brokers are offering right now.

Lastly, Fidelity sets itself apart by offering no additional fees for trading penny stocks. With no minimum deposit, $0 trade fees for stocks, options, and ETFs, Fidelity could be a solid choice for some.

How To Find Penny Stocks To Buy

Once you’ve found the best broker for penny stocks, it’s time to learn the ropes. Don’t just throw money into an account and “try” to become a trader. Take time to get an education. This starts with knowing how to do research, also known as “due diligence” or “DD.”

Do you follow the herd and buy trending Reddit penny stocks? In my opinion, no. Understand the basics, study fundamentals, learn basic charting, and, most importantly, know your risk tolerance. Not all penny stocks are right for all traders. If you can’t sit at your desk or on your mobile app every second of the day, high-volatility penny stocks may not be well-suited for your trading style.

If you prefer very active stocks, then “that mining stock,” which took 4 months to increase 2%, is probably not your cup of tea. When it comes to finding penny stocks to buy, research is key, and identifying trends can play a big role. We saw this with popular sectors like electric vehicles, renewable energy, and even blockchain/cryptocurrency technology.

Companies like ElectraMeccanica Vehicles Corp. Ltd. SOLO, Sunworks Inc. SUNW, and Marathon Patent Group MARA all took off. Being able to identify sector trends was important in these instances.

If you’re just getting started with learning how to day trade, here are a few articles to check out:

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