Best Brokers for Penny Stock Trading 2019

A little trepidation about investing in stocks never hurts. After all, you’re putting your money on the line. That healthy fear is particularly appropriate for penny stock investing.

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Penny stocks — often called OTC or over-the-counter stocks — are a lot like they sound, though they don’t actually cost a penny. Generally defined as stocks that trade for less than $5 per share, penny stocks are traded outside the major stock exchanges. Instead, they’re quoted on the OTC Bulletin Board or through the OTC Markets Group — formerly known as Pink Sheets — a financial marketplace that lists 10,000 securities and allows investors to trade via online brokers. (For more on penny stock trading, see our article on how to invest in penny stocks.)

Five dollars a share seems like a steal when stacked against companies that trade for $500 or more. This is where the backstory is important: These stocks are cheap for a reason. Because they are issued by small, yet-to-be-established companies, penny stocks can be volatile. They are often hard to research and accurately value, and they trade infrequently, which means they can be tough to sell. Bottom line, there are plenty of other ways to expose your portfolio to stocks without ponying up a high share price — here are a few suggestions.

Choosing a penny stock broker

In addition to the standard features you'd look for in a brokerage account — we've outlined those here — you'll want to be aware of the following when selecting an online broker to trade penny stocks:

Trade surcharges: Brokers often add a surcharge to stocks that are valued at less than a certain dollar amount, though that threshold will vary by broker. Some consider anything trading under $5 to be a penny stock, while others put the cutoff at $3 or $1. Because penny stock trades typically involve a large number of shares, it’s usually best to skip brokers with a surcharge and look instead for a broker that charges a flat commission.

Volume restrictions: The best penny stock brokers allow trades of unlimited shares without additional fees, but a few charge more for large orders. Some brokers also limit the number of penny stock shares you can trade in one order or in one day, slowing your ability to trade and forcing you to pay another commission for a second order.

Trading restrictions: Watch out for firms that require you to trade penny stocks by placing a phone order or that impose limits on the types of trades you can execute. Ideally, your penny stock broker will allow you to trade penny stocks with the same online platform used for other stock trades.

Below are the top brokerages for penny stock traders. You'll notice that many of these brokers also appear on our list of the top online brokers for stock trading; they're all well-rounded brokers that also offer a uniquely strong suite of features for penny stock trading. Read on to see which suits your trading preferences best.

Summary of Best Brokers for Penny Stock Trading 2019

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