Brokers: The Good, the Bad, and the Money

Before you trade in penny stocks, you need to choose a broker(s) who will help you achieve success. There are a few things you need to watch out for when choosing a broker. Following these guidelines should help you choose brokerage firms that are reliable.

Picking a Broker: The Basics

  • Additional Fees: The Lowdown

When selecting a broker, make sure that you question them regarding any extra payments they may charge. They are required to tell you about this. You need to know about every little charge that they may impose on you. This is because certain brokers charge an extra commission per share. This is in addition to the standard fee you have to pay.

For example, the brokerage firm TradeKing charges an extra $0.01 on every share priced at less than $2. This could lead up to rather high costs when the share trades accumulate. Therefore, be sure that you know exactly how much you will be paying.

  • Volume Limit

A lot of brokerage firms try to impose a limit on the amount of stocks you can trade in a day, or a different time period. An ideal broker would allow you to trade an unlimited number of shares all day every day. Since this kind of broker is quite rare, you need to look for either this or the broker with the most lax limits on volume.

  • Trade limits

Good brokers impose as few limits as possible on the trades you do. However, a lot of brokerage firms do not allow the shorting of penny stocks. This is actually perfectly legal, so you need to find a broker who allows it.

Try also to get a firm that allows you to trade your penny stocks online. You do not need to be told that you have to be physically present to perform your trades.

(get more help about selecting a right broker: Here)

Which Brokers are the best bet?

There are a vast number of brokers out there for you to set up a trading account with. Because of this, selecting a broker to get started with can be hard. However, there are a few brokerage firms that have been consistent and safe. They have left many traders satisfied. If you are looking for a good, reliable place to start, you should definitely check these out:


 

OptionsXpress

OptionsXpress

  • Low pricing – Commission per trade is $8.95 which is relatively low.
  • Fees are charged on a flat rate with no additional costs later
  • IdeaHub trading tool – Search for and conduct trades sorted by volatility, earnings etc.
  • All-in-one trade ticket
  • User friendly website
  • Good customer service – 24 hour phone support for futures traders, and limited hours live support (phone and chat) for everyone.
  • No account minimum
  • Does not allow short stocks!
  • Email support may be slow at times
  • Relatively slow Xtend desktop platform

 

Charles Schwab

Charles Schwab

  • No hidden fees during trading
  • Flexible commission structure
  • Low pricing – $8.95 per trade. If value of trade is less, that is charged.
  • Wide selection of penny stocks
  • Allows shorting with a margin account
  • No charges for trades after closing time
  • Banking services available
  • Round the clock customer support
  • StreetSmartEdge (desktop platform) highly rated among users
  • Wide range of experts in-house
  • No shorting without a margin account
  • Penny stocks are anything under $5 – This is quite important.
  • Not the best desktop platform

 

TD Ameritrade

TD Ameritrade

  • Good for beginners
  • Flat commission rate – $9.99 a trade
  • Huge range of penny stocks – Market access to almost everything
  • Wide array of educational resources
  • No hidden fees
  • No shorting penny stocks – This is a major let down for active traders
  • Better suited for new traders than experienced ones
  • $500 account minimum

 


 

USAA

USAA

  • Shorting of penny stocks is allowed
  • Market orders and limit orders are allowed
  • Good range of stocks to trade
  • $8.95 per trade – no hidden fees
  • No account minimum
  • Does not usually cater to active trading
  • Extra charge of one penny per share on orders over 1000 shares
  • Bad for large orders by experienced traders

 


 

Merrill Edge

Merrill Edge

 

  • Cheap fee – $6.95 a trade
  • No extra charges for high volume orders
  • No shorting
  • No accounts only for penny stocks
  • Small selection

 


 

Choice Trade

Choice Trade

  • No account minimum
  • Very cheap – $7 a trade
  • Extra volume charges for trades over 500,000 shares – 1% of trade value
  • No shorting of the penny stocks
  • No stock valued at less than $0.05 can be traded

 

Interactive Brokers

Interactive Brokers

  • Professional – Commission per trade = (Trade Value x $0.005/share + exchange fee)
  • No limits on penny stock trades
  • Shorting on penny stocks is allowed
  • Market and limit orders can be placed
  • Trader Workstation (desktop platform) is one of the best in the market
  • Great for very active traders
  • $10000 account minimum
  • Non DTC eligible trades not allowed
  • Pricey trades as exchange fees are passed on to the customer

 


 

Cobra Traders

Cobra Trading

  • Commission = $0.005 per share
  • Four different trading platforms
  • Direct access trading
  • Large range of penny stocks
  • Allows shorting
  • Market and Limit orders can be placed
  • 20% discount for orders over 250,000 shares
  • Premium services require payment
  • Large platform fee
  • Exchange fees are passed off to the customer

 

These are just a few of the brokers you can do business with when you’re trading in penny stocks. Be sure to do your research before signing up for any broker, and you should be fine. Good luck!