On this page, I will provide a list and description of what I feel are the best online brokers. Since Day Trading Penny Stocks focuses on independent trading of penny stocks, I will emphasize brokers which provide cheap online trading. However, I will also provide some full service brokers (which usually cost a bit more) for comparison’s sake.
Please note that I provide the web address for each broker, but I did not make active them web links (so you need to either type them manually into your web browser or copy and paste them into your browser’s address bar).
This is because brokers often offer commissions for referrals, and I wanted to make it clear that I am not making any commissions for identifying these brokers as the best online brokers or cheapest penny stock brokers. You can easily copy and paste the provided addresses into your browser to reach their sites.
Wang Investment (WangVest)
Wang Investment is a newer and lesser known company which is trying to compete with discount brokers such as E*TRADE. Wang Investment will charge you $8.00 for most limit and market orders. Note that I said most, not all, orders. It still will set you back $25.00 to trade stocks worth under $1.00.
There is no minimum balance to open an account with Wang Investment, but they do charge a $30.00 service fee every six months.
E*TRADE may be the most recognized of discount brokers. E*TRADE works best for active traders not requiring much in the way of support or service. Currently E*TRADE will charge you $12.99 for both market and limit orders (with prices dropping for active, large accounts). For penny stock trading, you pay the same for stocks on OTCBB or for stocks on Pink Sheets.
Opening an account with E*Trade requires a minimum balance of $1000 and inactive accounts will be assessed a $40 quarterly fee.
TD Ameritrade encompasses two former powerhouses among the best online brokers, Ameritrade and TD Waterhouse. These two companies have merged and since that merge, the deals have become sweeter for online traders.
TD Ameritrade now charges a flat $9.99 for every limit and market order regardless of the order size or stock price. This includes penny stocks on the OTCBB or Pink sheets.
This online broker charges no maintenance, service or inactivity fees. However, you’ll need $2000 to open an account with them (but keep your eyes peeled for promotional offers).
Trading Direct charges $9.95 for every limit and market order up to one million shares. This includes OTCBB or Pink sheet penny stocks online. You’ll find no minimum balance required to open an account. However, Trading Direct does charge a $60.00 annual fee unless you make at least one transaction a year or meet one of several other requirements. Trading Direct is a more simple online broker but their low cost makes them worth considering.
Recently ShareBuilder merged with ING Direct, combining an innovative small broker with the financial backing of a major international institution. ShareBuilder provides $9.95 for all trades.
ShareBuilder also features what they call the Automatic Investment Plan. This allows you to schedule dollar amount trades for Tuesday of each week and with those trades pay a commission of just $4.00 or even less. This won’t apply to active day traders, but it is a great opportunity for slowly building your portfolio over time.
Sharebuilder doesn’t charge any inactivity fees and doesn’t require a minimum balance.
Fidelity is quite possibly the best online broker for people serious about a wide range of stock trading (not just day trading penny stocks). The provide robust services for charting and research to help you watch stock chart patterns.
Thus they’re a bit more expensive. Fidelity charges $19.95 for both limit and market orders and they charge the same for all penny stock trades. They also require an opening balance of $2500 to open an online account. But thankfully there is no quarterly or annual fee.
Fidelity is a full service broker — not a discount broker — for serious investors.
Charles Schwab is another full service brokerage. They charge $19.95 for limit and market orders with an additional $0.015 for all shares traded over 1000. The charges don’t stop there: Schwab will charge you a service fee of $45 a quarter.
The base price for any small-cap or penny stock trades is $19.95. However, for more than 5000 shares,you will pay an additional $0.003 for each additional share traded.
Opening an online account with Charles Schwab requires a minimum of $2500.
Back to the discount brokers: LowTrades provides very basic service, but only charges $4.95 per trade. LowTrades charges you $50.00 for each six month period of inactivity, so be sure to execute those trades at least once every half a calendar year.
Most accounts don’t require a minimum balance to open, but day trading accounts will likely require a minimum balance to stay open. If you’re simply looking for cheap online trading, you could do worse than LowTrades.
Vanguard provides another full service online brokerage, similar to Charles Schwab and Fidelity. Thus it shouldn’t surprise you to see higher fees than you’d see at LowTrades or E*Trade.
Vanguard will charge you $25.00 to execute a limit or market order and they assess a $30.00 annual service fee for each account. Vanguard requires a minimum opening balance of $3000.
Trading penny stocks with Vanguard is a touch more complicated. With Vanguard, you pay a flat $20.00 commission per trade plus an additional two percent of the total principal.
Zecco is a bold new online broker that has become a favorite among beginners. Why? Because they offer trades for free. Yes, free.
Zecco manages to do this by earning their profits through interest on your money and ads on their site. While other brokers also make money this way, the Zecco business model is based on solely profiting from those ads and that interest.
Of course, it’s never that simple, right? Zecco offers as many as 10 trades a month for free… and then they charge you $4.50 a trade, which is still mighty low.
Zecco recently made their service even more accessible by no longer requiring a minimum funding level. Please note, however, that you will need a minimum of $2500 to qualify for the free trades.
Note: Fees and terms listed here are subject to change as the companies make changes, but I will try to keep them updated.
When looking for online stock brokers you will need to decide if it is in your best interest to find the cheapest place to trade penny stocks or one that will provide you with more tools and services to help you become more informed, which in turn may help you find the best penny stocks. Everyone has a different process and different needs in this area. Beginners may want more of a full service broker while seasoned traders may simply want cheap online trading without the frills.
I hope this provides a strong list of quality brokers from which to choose. I feel they are among the best online brokers, but I encourage you to evaluate their services and fees to determine which one will work best for your particular need. Also do some comparison shopping and compare them to other online stock brokers not listed here. Don’t just look for cheap online trading, look for flexible fees and keep an eye on the difference in fees between normal stock trades and penny stock trades.