Robinhood Penny Stock Fees. Robinhood OTC Stocks Trading (2022)

Robinhood penny stock cost: commission charged for buying pink sheets/OTC BB/stocks priced under $1. Is Robinhood good for (offers) OTC and penny stocks trading?

Does Robinhood Offer Penny Stocks and OTC Stocks?

Robinhood does NOT offer trading OTC (over the counter) securities and pink sheets stocks.

Robinhood, however, does offer trading penny stocks defined as securities with share price under $5.00, provided they are listed on either NYSE or NASDAQ.

Keep in mind that Robinhood will execute your penny stock trade at the end of the day. This means day trading on Robinhood is impossible.

If you are interested in trading OTC (over the counter) securities and pink sheets stocks not offered by Robinhood, then we recommend Firstrade. The broker provides access to over 15,000 OTC stocks as well as penny stocks with $0 commission, and it's the best option for OTC traders on the market (learn more).

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Robinhood Penny Stock Fees

Robinhood currently does not charge any fees for trading stocks with share price under $5, also called penny stocks. Robinhood’s charts are very basic and the price action is not as good as on a real broker. Also, you can’t short penny stocks, which might be an important part of your strategy if you know which ones will fall after the big spike. Robinhood may be good for swing trading with semi-large accounts.

Hazards of the OTC Marketplace

Trading in the over-the-counter market has always been fraught with all sorts of problems that are less common on America’s major exchanges. For example, penny stocks tend to have higher bid-ask spreads, which increases the cost of round-trip trades.

OTC equities also have more volatility and less liquidity. This situation can cause profits to fluctuate wildly, and buyers can be difficult to find.

The government doesn’t regulate this trading environment as strictly as it does the major exchanges. As a result, criminal activity is more likely. The Pink Sheets market especially has seen its share of securities fraud over the years.

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Robinhood Overview

Robinhood formed in California in 2013 and has gained popularity primarily among millennials for being an easy to use and sleek looking app with free stock trades. Robinhood started solely as an app and only recently launched a website allowing users to log in from a computer.

While deceptively easy to use, Robinhood requires a greater knowledge of the stock market and provides little guidance or advice for new users. Its features include an easy to navigate interface which allows you to easily track your portfolio as well as track individual equities. You can set up all the trade types you would expect to find at a broker dealer as well as option contracts. 

Robinhood Fees

Robinhood does not charge any trading fees and only profits by holding your uninvested balances in its app, allowing Robinhood to accrue interest. The disadvantage is a three-day waiting period on proceeds after you have sold stock in your portfolio. However, investors may also subscribe to a “Robinhood Gold” premium version to skip the three day hold policy for $10/month.

As Robinhood offers a completely free stock buying model, it is particularly attractive for small investors as trade fees can be relatively expensive when buying small amounts of stock.

Robinhood Key Features

- Easy to navigate and interface on mobile and web

- Ability to make the following trades: buy limit, market buy, buy stop, buy loss, market sell, sell stop, sell limit

- Buy and sell options contracts 

- Some information on stocks including earnings, recent news and buy/sell analyst recommendations on a growing number of equities

Robinhood Penny Stocks

Robinhood Cons

- Robinhood does not provide much research and their charts have limited information, only going back five years

- Mutual funds are not available

- It is entirely self-directed with no investing guidance or managed account option, which can be daunting for a new investor. Investors should research their investment choices carefully before making any trades to avoid disappointment or unsuitable risk.

Robinhood Penny Stocks Conclusion

If you are a stock market enthusiast or would like to be more actively involved in your investing, Robinhood is a great way to learn without paying broker fees. If you would prefer to put your faith in the hands of a managed account M1 Finance is a great option too. Many professional investors often choose to invest into a managed account to remove the emotional attachment that comes with trading for your own account.