Best US Brokers For Penny Stocks Trading

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Investing in penny stocks can offer some of the best returns in the stock market. But this comes with great risk, as many low-priced stocks are either early-stage, unprofitable or out of favor. For investors who want higher returns on low-priced shares, if you’ve done your homework and with the right strategy and a keen eye for market trends, penny stocks can offer significant profits.

However, selecting the right penny stocks broker is crucial to making sure you get the best pricing, tools and the lowest costs. Our guide to the best brokers for penny stocks will help you choose a platform that is most appropriate for your trading preferences.

Our Top Picks For Penny Stock Brokers

There are hundreds of online brokers that offer stock trading in the US, but only a few stand out for penny stock investing. We’ve compared fees, accessibility, trading tools, and customer support to bring you our top picks for penny stock brokers. All of the below brokers we have tested personally and interviewed the CEOs.

US Stock Trading PlatformUS Stocks AvailableUS Stock Trading CostsOur RatingMore Info
Interactive Brokers US Stock Trading3,5000.003%
See Platform
eToro US Stock Trading2,0190%
See Platform

Penny Stocks Explained

Penny stocks are classified as shares of generally small (but sometimes big) companies that trade for less than $5 per share.

Peny stocks are known for their volatility and high risk and are often associated with scams (like in The Wolf of Wall Street), but they also offer the potential for substantial capital gains.

You can trade the penny stocks like normal shares, but they are also typically traded outside the major market exchanges, often through over-the-counter (OTC) transactions.

You should only invest in OTC stocks if you are completely confident in a company’s future as you may find them hard to sell. You could also end up being stuck in a “lock-in” person where you are not allowed to sell them for a certain amount of time.

The other key thing to watch out for with penny stocks is the “spread” which is the difference between the buy and sell price. This is often much wider than with main market stocks.

Are Penny Stocks Worth It?

Yes, penny stocks are worth investing in as part of a diversified portfolio.

But you should only allocate a small percentage of your investment capital to them. The appeal of penny stocks comes from the potential to yield dramatic returns on a minimal investment, but as with great reward comes great risk.

The volatile nature of penny stocks and the higher risk of loss should not be ignored, which is why investing in a wide selection of stocks is a better strategy than putting all your eggs in one basket.

Pros & Cons

This section will compare the pros and cons of investing in penny stocks versus more traditional stocks, offering insights into whether penny stocks could be a worthy addition to your investment portfolio.

Pros of penny stock investing

  • High Potential Returns: Buying a small amount of shares could yield big returns
  • Low Entry  New Investors: You don’t need lots of money to buy into a relatively large position
  • Opportunity for Growth: Lots of companies that are now considered major players in the stock market started as penny stocks.

Cons of penny stock investing

  • High Volatility and Risk: Even small buy and sell orders can have a big impact on the price
  • Lack of Transparency and Information: There is not as much news flow around smaller companies
  • Illiquidity: As penny stocks are not heavily traded it can be difficult to buy even small amounts of shares

What Are The Fees For Penny Stocks Trading?

Trading penny stocks can incur various fees, from commissions to regulatory costs, that can impact your overall investment returns. Understanding the fee structure is crucial before you start trading.

The main costs of penny stock investing are:

  • Commission: What the broker charges when you buy or sell shares (this can often be included in the spread/price)
  • Spread: The difference between the buy and sell price in the market. Penny stock buy/sell spreads can be as wide as 25% which means that if you invest $1,000 you instantly lose $250, if you want to sell straight away.
  • Accounts costs: How much will your broker charge you on an annual basis for holding your shares
  • Opportunity costs: Could you have made more in traditional products like funds or FAANG stocks?
  • Diversification costs: As penny stocks are very high risk a good strategy is to buy more than one company as investing in a single penny stock may fail.

How To Get Started Investing In Penny Stocks

Beginning your journey into penny stock trading involves several steps, starting with choosing the right broker. This segment guides you through the process, from selecting a broker that meets your needs to registering an account and making your first trade. We also offer tips on conducting research and making informed trading decisions.

  1. Choose a selection of penny stocks you want to invest in
  2. Check that a broker offers them by searching for their code on the platform
  3. Open an investing account with a reliable US stock broker
  4. Deposit funds and buy your shares online, if the penny stock is illiquid you may have to call your broker or send a message to place the order
  5. Track the performance of your investments on the trading platform. it’s important here to consider the buy/sell spread in your calculation.

Our Top Recommended Penny Stock Brokers

After thorough research and analysis, Interactive Brokers is our highest-rated broker for penny stock trading. you can read our full IBKR review which summary includes an overview of Interactive Brokers’ strengths, such as user-friendly platforms, low fees, and robust trading tools, along with a brief explanation of our rating and review methodology.

Penny Stock Brokers – FAQs

Do I even need a broker to buy penny stocks? Yes, you cannot buy shares directly from penny stock companies, you need to buy them either OTC through a broker or online via an investing platform.

Which broker is best for penny stocks? We have rated Interactive Brokers as the best broker  for buying penny stocks. However, in certain circumstances choosing a broker depends on your individual trading needs and preferences, including factors like fees, platform usability, and customer support. For our full analysis of the best brokers see all our US investing guides.

Are penny stocks a waste of money? Sometimes, penny stocks are high-risk and can lead to a complete loss of investment. However, penny stocks also offer the potential for significant returns, making them an attractive option for some investors.

What are the most popular penny stocks? Popular penny stocks often belong to companies in emerging industries or those with the potential for significant growth. The most popular stocks can change frequently based on market trends and news. For the most up-to-date information on the best penny stocks to buy sign up for our stock market analysis.

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