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Best Brokers for Penny Stock Trading of June 2024

Sam Levine, CFA, CMT

Written by Sam Levine, CFA, CMT
Edited by Carolyn Kimball
Fact-checked by Steven Hatzakis
Reviewed by Blain Reinkensmeyer

March 19, 2024

Penny stocks are shares that trade for under $5 and trade over the counter, or OTC, though there’s not really an industry-wide definition for them.

Penny stocks are super duper risky. They’re often illiquid — meaning difficult to quickly convert into cash — and have loose financial disclosure requirements, which makes them subject to scams and market manipulation. Their low prices, however, can tempt some investors with the possibility of very high returns.

Just in case you are feeling that speculator vibe, I researched which brokers are best for buying cheap OTC stocks by comparing the pricing and trading platforms of 17 online brokers in the U.S.

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Best Online Brokers for Trading Penny Stocks

Here are the best brokers for trading penny stocks.

  • Fidelity - $0 OTC trades
  • Firstrade - $0 OTC trades
  • Charles Schwab - $6.95 flat fee per OTC trade
  • E*TRADE - $6.95 flat fee per OTC trade
  • TradeStation
    - $0.005 per OTC share (min $1, max $50)
Fidelity
5/5 Stars 5.0 Overall

$0 OTC trades

Minimum Deposit$0.00
Stock Trades$0.00
Options (Per Contract)$0.65

Fidelity is a value-driven online broker offering $0 trades — including penny stocks, unlike many of its competitors. Combined with industry-leading research, excellent trading tools, an easy-to-use mobile app, and comprehensive retirement services, Fidelity is a winner for everyday investors. Read full review

Pros
  • Excellent research and mobile app
  • Top-notch education
  • Decades of reliable client service
Cons
  • No dedicated mobile app for active trading
Firstrade
4.5/5 Stars 4.5 Overall

$0 OTC trades

Minimum Deposit$0.00
Stock Trades$0.00
Options (Per Contract)$0.00

Firstrade offers no-commission stock and ETF trades, including penny stocks, and it placed among Best in Class for this category in our 2024 Annual Awards. Though it trails industry leaders in some core categories, it’s a particularly attractive option for Chinese-speaking investors. Read full review

Pros
  • Excellent for Chinese-speaking investors
  • Has bolstered its options education and trading capabilities
  • Easy-to-use mobile app
Cons
  • Trading platform and tools trail industry leaders
  • Investor education is thin
Charles Schwab
5/5 Stars 5.0 Overall

$6.95 flat fee per OTC trade

Minimum Deposit$0.00
Stock Trades$0.00
Options (Per Contract)$0.65

Schwab’s thinkorswim desktop platform has easily customizable watchlists that are ideal for monitoring dozens of stocks with a glance. Read full review

Pros
  • TD Ameritrade’s excellent thinkorswim trading platforms now available
  • Trading-friendly app and browser enhancements
  • Exceptional high net worth services
Cons
  • No cryptocurrency trading
  • Mutual fund fees are complex
E*TRADE
5/5 Stars 5.0 Overall

$6.95 flat fee per OTC trade

Minimum Deposit$0.00
Stock Trades$0.00
Options (Per Contract)$0.65

Though it charges $6.95 for penny stocks, E*TRADE was a top-performing broker for our 2024 Annual Awards and offers standout platforms — including an impressive mobile app — that are feature-rich and easy to use. Read full review

Pros
  • Watch lists are the best in the business
  • Smooth mobile navigation
  • High-quality high-net-worth Morgan Stanley proprietary research
Cons
  • Cryptocurrencies not currently available
  • Margin rates are high compared to other brokers
TradeStation
4/5 Stars 4.0 Overall

$0.005 per OTC share (min $1, max $50)

Minimum Deposit$0.00
Stock Trades$0.00
Options (Per Contract)$0.60

When using TradeStation for trading OTC penny stocks, the cost under the TS Select and TS Go pricing plans is $0 per trade up to 10,000 shares ($0.005 per share thereafter). TradeStation ranked among Best in Class in our Investment Options and Day Trading categories for 2024. Read full review

Pros
  • Web trading platform is well thought-out
  • TradeStation Crypto is powerful and intuitive
Cons
  • User experience can be frustrating
  • No third-party fundamental research
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Winners Summary

$0 OTC trades - Fidelity

Company Minimum Deposit Stock Trades Options (Per Contract) Offers Visit Site
Fidelity logoFidelity $0.00 $0.00 $0.65 Read Review

Fidelity won Best Overall in our 2024 Annual Awards because it has almost everything everyday investors could want while being easy to use and attractively priced. While most other brokers either charge extra for penny stocks or refuse to trade them at all, Fidelity charges nothing. In my book, it’s pretty hard to beat for this type of trading. Read review.

Fidelity mobile app gallery

Fidelity stock research gallery

$0 OTC trades - Firstrade

Company Minimum Deposit Stock Trades Options (Per Contract) Offers Visit Site
Firstrade logoFirstrade $0.00 $0.00 $0.00 Read Review

Firstrade, like Fidelity, offers $0 penny stock trading. It doesn’t have the breadth of services of Fidelity (in my testing, I've found that few do), but speculative investors may find Firstrade a great fit, as it also doesn’t charge contract fees for options trading. Native Chinese speakers will appreciate Firstrade’s content and Chinese-speaking support staff. Read review.

Firstrade mobile app gallery

Firstrade stock research gallery

$6.95 flat fee per OTC trade - Charles Schwab

Company Minimum Deposit Stock Trades Options (Per Contract) Offers Visit Site
Charles Schwab logoCharles Schwab $0.00 $0.00 $0.65 Read Review

Having acquired TD Ameritrade in 2020, Schwab runs neck-and-neck with Fidelity in almost every category and excels at stock trading. The excellent thinkorswim trading platform has easily customizable watchlists that I found are great for watching both the fundamentals and the technicals of the stocks I follow. Read review.

Charles Schwab mobile app gallery

Charles Schwab stock research gallery

FAQs

Penny stock fees comparison

Company Overall Penny Stock Fees (OTC)
Fidelity logoFidelity 5/5 Stars $0.00
E*TRADE logoE*TRADE 5/5 Stars $6.95 info
Charles Schwab logoCharles Schwab 5/5 Stars $6.95
Firstrade logoFirstrade 4.5/5 Stars $0.00
TradeStation logoTradeStation 4/5 Stars $0.01 info

What are penny stocks?

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). We think of penny stocks as microcap companies with prices under $5 that only trade over the counter.

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?

thumb_up_off_alt Pros

  • Small companies are rarely followed by analysts and fund managers, which leaves opportunities for astute small investors.
  • Their illiquidity may lead them to trade at a discount to their true value.

thumb_down_off_alt Cons

  • Penny stocks are often the targets for fraud and pump-and-dump scams.
  • They often have wide bid-ask spreads, which makes them more expensive to exit.
  • Little financial disclosure and regulatory oversight.

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.

  1. Choose a reputable broker: Pick a trustworthy firm to open an online brokerage account.
  2. 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.
  3. 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?

Based on our analysis of top U.S. online brokers, these are the best brokers for penny stock trading:

  • Fidelity
  • Firstrade
  • Charles Schwab
  • E*TRADE
  • TradeStation

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. Do careful research before investing in a penny stock.

Our Research

Why you should trust us

Sam Levine, CFA, CMT, the 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:

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About the Editorial Team

Sam Levine, CFA, CMT
Sam Levine, CFA, CMT

Sam Levine has over 30 years of experience in the investing field as a portfolio manager, financial consultant, investment strategist and writer. He also taught investing as an adjunct professor of finance at Wayne State University. Sam holds the Chartered Financial Analyst and the Chartered Market Technician designations and is pursuing a master's in personal financial planning at the College for Financial Planning. Previously, he was a contributing editor at BetterInvesting Magazine and a contributor to The Penny Hoarder and other media outlets.

Carolyn Kimball
Carolyn Kimball

Carolyn Kimball is managing editor for Reink Media and the lead editor for the StockBrokers.com Annual Review. Carolyn has more than 20 years of writing and editing experience at major media outlets including NerdWallet, the Los Angeles Times and the San Jose Mercury News. She specializes in coverage of personal financial products and services, wielding her editing skills to clarify complex (some might say befuddling) topics to help consumers make informed decisions about their money.

Steven Hatzakis
Steven Hatzakis

Steven Hatzakis is the Global Director of Research for ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. Steven is an active fintech and crypto industry researcher and advises blockchain companies at the board level. Over the past 20 years, Steven has held numerous positions within the international forex markets, from writing to consulting to serving as a registered commodity futures representative.

Blain Reinkensmeyer
Blain Reinkensmeyer

Blain Reinkensmeyer has 20 years of trading experience with over 2,500 trades placed during that time. He heads research for all U.S.-based brokerages on StockBrokers.com and is respected by executives as the leading expert covering the online broker industry. Blain’s insights have been featured in the New York Times, Wall Street Journal, Forbes, and the Chicago Tribune, among other media outlets.

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