Best Penny Stock Brokers for Online Trading in 2023

Retail investors have the opportunity to invest in all types of markets, including penny stocks. Penny stocks are shares that trade below $5 and can be valued as low as a few pennies per share. They allow investors to hold thousands of shares for a small amount of capital, but while that may sound attractive, these stocks can be considered high risk.  That’s why you need to know the best penny stock brokers.

Many penny stocks are traded over the counter (OTC) as they do not meet specific requirements for major stock exchanges. With the lack of regulatory requirements and increased risk, finding the right penny stock broker is crucial for penny stock investors.

It can be challenging to find the right stockbrokers. Here is a list of Benzinga’s favorite penny stock trading platforms and information about what they offer.

Interactive Brokers is another well-recognized platform that can be beneficial for trading penny stocks. However, before you can trade these stocks, you must request penny stock trading permission via the platform. In addition, the firm charges a low commission for trading penny stocks.

Webull’s platform offers up to 4x day-trade buying power and 2x overnight buying power with a margin account. With technical indicators, economic calendars and ratings, the platform is designed for intermediate and experienced traders. It charges an annual margin rate from 6.99% to 3.99% and requires no minimum deposit. Webull does not charge commission fees.

eToro allows you to invest in cryptocurrencies and ETFs, but it’s also a great place to invest in stocks. While you are adding stocks to your portfolio, you can be sure that your net worth is growing and you are building wealth for the future.

While penny stocks will not make you rich all on their own, it helps to use a platform that helps you create a more diverse portfolio. eToro also allows you to:

• Invest in full stocks or fractionals for as little as $10–perfect for penny stocks
• Engage with experienced, real investors regarding strategies
• Mix your crypto holdings with stocks and ETFs
• Review detailed charts, indicators and analyses
• Pay zero commissions

Robinhood Markets Inc. (NASDAQ: HOOD) is a well-known broker championed by many retail customers. The commission-free broker is designed for new traders, while its online app is designed primarily to be easy to use. The downside of Robinhood is that it does not offer OTC stocks. The only penny stocks provided are those listed on the Nasdaq or NYSE.

Magnifi is a marketplace that allows you, as the investor, to use common brokerage tools and AI to make the best decisions for your portfolio. Because you can pull up all the information you need on a given asset, you can easily invest in the assets that will give you the results you deserve and better match your strategy.

Search for the investment options that meet your needs, invest in specific categories or scan for assets in a price range that’s affordable for you.

Best for long-term investors and those who require a bit of client support, you can also learn more about investing from this platform, utilize the AI-powered investing assistant, enjoy commission-free investing, try the mobile app and take advantage of over 15,000 possible investment options. This makes Magnifi a good place to trade for both seasoned and novice traders to access penny stocks.

Cobra Trading, a direct access broker, is an excellent platform for trading penny stocks, including OTC stocks. Fees are low, and it offers discounts for high-volume traders. However, all trades are charged a $1 minimum commission. 

TD Ameritrade is a great online trading platform that includes the purchase of penny stocks. The company is commission-free with no platform fees, no data fees and no trade minimums. For OTC Bulletin Board (OTCBB) stocks, there is a $6.95 per trade fee. TD Ameritrade has a user-friendly website that is easy to navigate.

Tradestation does not charge a fee for stocks or penny stock trading, but this benefit only applies to the first 10,000 shares per trade. Both of its mobile apps offer commission-free penny stock trading. In addition, depending on the account you set up, there is a minimum deposit for its TS Select account of $2,000.

The importance of a good broker cannot be underestimated — finding one that is safe and reliable is vital. Unfortunately, penny stocks must satisfy a list of requirements to join major exchanges, and, therefore, most are traded OTC. 

Fee structures and commissions will vary depending on the broker you choose, and because of the low liquidity of penny stocks, bid-ask spreads will also be determined by the different brokers and stocks. Therefore, it is vital you make sure the broker is regulated and suits your requirements. In addition, some penny stock brokers offer additional benefits and education that can be useful for everyone. An important point to note is that you must research the broker beforehand.

Choosing a penny stock broker can be a long process because of the vast choice of brokers on offer. However, the steps below can help you speed up the process.

Different brokers have varying requirements when it comes to signing up, depositing and withdrawing. The assets it allows you to trade also vary. As penny stocks are usually traded OTC, check if the broker offers the stocks you are interested in. 

Most importantly, ensure that the broker is regulated in your region.

When buying or selling stocks, there may be fees. Even if the broker says it is commission-free, other costs might be associated with using the broker, so investigate potential hidden charges. If the broker does charge a commission, it can impact potential profits, so take them into consideration as well. Flat fees are much better when purchasing a large amount of shares as this is set at a fixed price and does not depend on the amount you buy, which can impact your bottom line if you trade large positions.

Furthermore, spreads can change and be high from the lack of liquidity in some penny stocks. The small market capitalization and low liquidity of many penny stocks mean brokers have a large spread.

You should analyze individual penny stocks and conduct thorough research as there can be many scams that promise low costs and high returns. Make sure you avoid this situation by only trading with a broker you can trust and understand the company you are investing in. 

The qualities of a good penny stock broker involve many different factors. Once you have found a list of safe and regulated brokers, look at each in a more detailed fashion.

• Easy navigation: A user-friendly platform initially might not seem important, but you’ll save yourself a lot of hassle in the long run if you choose a stock broker with this characteristic. Look for a platform that allows you to enter and exit trades quickly, manage your portfolio and answer any questions or problems you have. A user-friendly platform is easier to manage and can save a lot of future headaches.
• Technical tools: Analysis and research are vital to traders and investors. Having additional technical analysis tools can help you learn more and test and implement new trading strategies. Of course, not everyone uses technical analysis, but having various indicators available can significantly benefit those who do.
• Large selection of stocks with cheap fees: If you are interested in trading penny stocks, then a quality to look for is a broker with numerous penny stocks to choose from, with low fees.
• Outside access: A helpful addition can be linking external platforms to the brokerage, making managing your portfolio, charts, and any additional research more accessible. This quality can be important when managing an extensive portfolio.

Penny stocks can be high risk. However, with high risk comes the potential for high reward because of the number of shares you can purchase at a low price. Just be aware of an increased chance of failure from their highly volatile nature and lack of liquidity. Therefore, if you trade penny stocks, you at least want to make sure you have a broker you can rely on.