There are several online brokerages available for penny stock trading. If you’re wondering how to buy a penny stock, you will first need an account opened with a brokerage. Online brokers provide many more services than telephone services, so it is advised to set up an account with a reputable online broker. Choosing the best penny stock broker can be tricky but there is a check list that may help you with your decision.
The first thing you want to look for is a brokerage that offers no costs to set up your account. These costs can range from account transfer fees (moving one account to another), maintenance fees, and minimum deposits required. The best accounts are the ones that offer no fees to setup or transfer, and some even offer you bonuses for your initial deposit. Many offer free trades when you first sign up. Others offer promo codes for as much as $100 just for opening an account..
Commission fees should be a huge factor when you shop for a brokerage account. Some can be as low as $3.95 while others charge almost $50. Unless you’re a hyperactive trader, this might not be a big issue for you. You do need to also consider the services and tools the brokerage offers.
Some charge a quarterly fee for their services. E-Trade charges $40 while Fidelity doesn’t charge at all. Some brokerages charge nearly $50 just to make a deposit. Others can even charge a maintenance fee..
Scottrade – this is one brokerage that is consistently on the top list. The minimum balance is only $500 and charges $7 for both market and limit orders. There are no quarterly or annual fees. Unfortunately for penny stock traders, there is an additional fee of 0.5% of the total principal on each trade..
E-Trade – this brokerage charges $12.99 for both market and limit orders – this includes penny stock trading for $1 or less and all OTCBB stocks. The minimum balance for E-Trade is $1,000..
Fidelity – they require a $2500 balance an charges $19.95 for both market and limit orders – including all penny stocks.
Charles Schwab – charges $19.95 for market and limit orders – and an additional $0.015 for all shares over 1,000. Schwab also charges you a service fee of $45 a quarter..
TD Waterhouse – charges $17.95 for market orders and $20.95 for limit orders. You need a $1,000 starting balance to open an account with TDW. And you are charged a $25 quarterly fee but this is waived if you make 3+ trades in a 6 month period..
Ameritrade: This is one of the most known discount online brokers. They have a flat charge of $10.99 for all market and limit orders including penny stocks. The minimum requirement is $2000 to open an account and there is a $15 quarterly fee only if your account falls below $2000..
Vanguard: charges $25 to execute any market or limit order. It assesses a $30 annual service fee for every client and you need a minimum opening balance of $3,000. If you buy penny stocks with Vanguard, they will charge you a flat $20 commission fee plus 2% of the total principal..