Choosing the right penny stock broker is quite crucial for making better profits. This is best explained using an example.
Assume that Broker #1 charges a flat-rate of $7 per trade. This means that if you buy $5,000 worth of stock ‘PQR’ at a price of $.10 per share, totaling 50,000 shares (5,000 / .10), the total cost to buy the shares is then $7.
On the other hand, assume that Broker #2 charges $.004 per share with a maximum cost of 0.5% of the trade value. In this case, if you buy $5,000 worth of stock ‘PQR’ at a price of $.10 per share, totaling 50,000 shares (5,000 / .10), the total cost to buy the shares is then $25.
Basically, for Broker #2, the charges would be $200 using per-share method [$0.004 X 50,000 shares = $200] or $25 cap [capped at 0.5% of trade value of $5000].
As you can see, the max costs limits are still quite expensive when compared to simply paying one flat-rate fee.
Penny stocks generally have a not-so-stellar reputation. Many brokers charge additional fees for allowing you to trade penny stocks. It is best to skip such brokers if you want to make enough profits from your trades. Following are some ways in which brokers charge extra fees for penny stocks.
#1 Surcharges: Some brokers add a surcharge when trading penny stocks. They generally have the rule that surcharge would be added when trading a stock below a certain threshold of dollar value. For some brokers, it would be below $5, while others may charge it for stocks below $3 or $1.
The best penny stock brokers do not generally add surcharges.
#2 Restrictions in Volume: Some brokers charge additional fees when large orders are placed for penny stocks. Some others have a limit on the number of shares that can be bought or sold and charge commissions for orders that do not fulfill these criteria.
The best penny stock brokers do not generally have such volume restrictions.
#3 Restrictions in Trading: Many brokers have limitations on the method of placing orders and the type of trades that can be executed.
Good penny stock brokers allow you to place your order via their online platform or through phone orders. There would also be no limitation on the type of trade you can execute.
Best Penny Stock Brokers
Based on the various factors like trading platform, reasonable commission, account minimums necessary etc, the following are best Penny Stock Brokers in no specific order
TradeStation has commissions of $5.00 per trade and needs an account minimum of $500.
Fidelity has commissions of $4.95 per trade and needs an account minimum of $2,500.
TD Ameritrade has commissions of $6.95 per trade and needs an account minimum of $0.
Charles Schwab has commissions of $4.95 per trade and needs an account minimum of $1000.
Interactive Brokers has commissions of $0.005 per share and needs an account minimum of $10000.
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