Conventional wisdom says that buying stocks priced $1 or less per share is extremely risky and it’s a bad investment.
In most cases - we agree. But in every rule there are exceptions.
For example, Citibank stock was basically a penny stock in March of 2009. Now its price fluctuates between $5-$6 per share (considering reverse stock split)
and some analysts believe it will triple within next 2 years. It would have been silly not to buy, or, even worse,
to sell Citibank shares in March of 2009 ONLY because of "I won’t allow penny stocks in my portfolio" rule.
Example above shows that there rare occasions when we want to be able to trade stocks under $1. There is one problem with this though:
many online brokerage firms are trying to overcharge investors for penny stocks trades.
The most common way brokerage companies do this is by putting a $0.01 or similar surcharge on
each share of stock priced below $1. In this case if you buy 5,000 shares of penny stock and regular stock commission is $10,
this trade will cost you $10 + 5,000 * $0.01 = $60! It’s a bit high, to say the least. Other brokerage houses
came up with less strict rule: surcharge (usually $0.01) on all shares above certain limit (2,000 or 5,000 shares
are the most common numbers). This is not as predatory as previous case, but it still makes trading penny stocks very expensive.
Fortunately, there is very highly rated brokerage house that doesn’t surcharge
their customers for trading stocks priced under a dollar or for large-size orders. Let's take a look at the best stock broker for penny stock trading:
Best Penny Stocks Broker Pricing
|Stocks and ETFs|| $9.99|
|Stocks and ETFs broker assisted|| $49.99|
|Stocks and ETFs interactive voice response (IVR) telephone system|| $34.99|
|Options|| $9.99 + $0.75 per contract|
|No-load mutual funds|| $49.99|
|Treasuries at auction|| $25|
|All other bonds and CMOs, CDs|| on a net yield basis|
|Futures|| $2.25 per contract (plus exchange & regulatory fees)|
|Forex|| Non-commission currency pairs trade in increments of 10,000 units (and do not contain a "#" symbol suffix). There are no additional fees or charges.|
|Investments|| stocks, mutual funds, options, ETFs, bonds, CDs, UITs, futures, and forex|
|TD Ameritrade\TDA minimum deposit to open account|| $0 for cash account, $2,000 for margin account|
|Fees||TD Ameritrade fees|
- No surcharges on penny stocks, large orders, or after-hours trading
- Large and well-known company with 126 local branches
- Two excellent trading platforms: Thinkorswim and Trade Architect
- Users can practice trading without risking real money using PaperMoney virtual trading
- Easy access to myTRADE trader community
- No account maintenance or inactivity fees
- Free streaming quotes, including Level II
- Rich selection of independent, third-party research from 12 firms (Standard & Poor's, Morningstar, Jaywalk, TheStreet, etc.)
- 100+ ETFs with no commissions
- Large number of mutual funds - over 13,000 available; 2,500 NTF (no-transaction fee) funds
- Free DRIP (dividend reinvestment plan)
- No-fee IRA accounts
Best Penny Stocks Broker Review
TD Ameritrade offers flat-rate, $9.95 per trade commission on any trades including Pink Sheets, OTCBB, and stocks priced under $1. The firm does not have penny stock and large order
surcharges and fees.
TD Ameritrade offers very powerful and comprehensive trading tools, including two great trading platforms - Thinkorswim and Trade Architect
(Trade Architect review).
The company bought the most innovative online brokerage firm - Thinkorswim (Thinkorswim review) -
and now offers to its clients Thinkorswim's best-in-class trading software, customizable charts, integrated one-click trading, and technical tools.
The Thinkorswim is a completely free desktop application that needs to be downloaded from the TD Ameritrade website. To be eligible one only needs to be a
client of TD Ameritrade. Within the Thinkorswim platform users
can trade almost every type of investment that they can think of: stocks, options, FOREX, futures and others. In addition, this advanced trading software
offers fantastic technical analysis tools for chart readers, which is critical to many traders.
The charting and trading screens are very customizable to user's preferences.
Users can move windows around, change colors and add or subtract hundreds of preset technical studies, including some that can only be found in Thinkorswim
like "market forecast", "trade the market" and others. Of course, there are other advanced features such as Fibonacci analysis tools and drawing tools to draw
support and resistance lines.
Very advanced mobile smartphone and tablet applications are available for iPhone, iPad, Windows, Android, and Blackberry users as well.
Continue TD Ameritrade Review.
TD Ameritrade Promotion
This article was updated on 8/31/2015.