Monday, 13 January 2014

Best Penny Stock Brokers

            Let’s say you know the fundamentals to trading and you want to start trading right this moment, so where do you go? You need a broker that will buy the stocks on your behalf, and sell them when you choose (also to short). So from the many to choose from, which one is the best one? And specifically, which one is the best penny stock broker? My guess is that like me, when I started off, you want a broker with low commissions, low minimum deposit amount and a trading platform good enough to get you the trades you want in the quickest way possible. And there is one broker just for the job…okay I lied: that’d be just too perfect. There are a couple of decent brokers to choose from, they each have their positives with their fair share of negatives. Before reading, Canadians, your brokers can be found in this post.

TD Ameritrade / Think or Swim

            A couple of years ago, many would agree that Think or Swim was the best broker with its great trading platform and the Think or Swim fees were a mere $3.95 per trade, but TD Ameritrade decided to buy Think or Swim for a whopping $606 million dollars. Now, both brokers (essentially the same one) now have a $9.95 commission fee. Although the trading platform is beautiful and all, for a beginning trader with little to invest with, these fees can eat up your profits quite heavily. On top of that, if you're willing to short penny stocks, you can't short the ones under $5 and they don't have all that many to short in the first place.

Interactive Brokers

            Now this one is tricky ladies and gentlemen. It’s the one I use but don’t get too excited because it does have its drawbacks. For one the commissions are only $1 for 100 shares and under. Terrible I know. Jokes aside, the $1 commissions are a fantastic feature for any prospective trader to have when starting anew but what about cheap penny stocks? Well, if you're purchasing these low priced stocks, you obviously need to buy shares in the thousands so each share after 100 will cost you $0.005 a share. Another bonus about IB is that they usually have shares to short, whereas TD usually won't even let you short a penny stock. What may turn off some people willing to deposit their money on IB is that their minimum required deposit is $10,000. You may be asking how I managed to get an account with them if I did not have $10,000 to start with. Well, if you are under the age of 26 when you make your initial deposit, all you need is $3,000 USD and they’ll be willing to accept you. As for the Interactive Brokers webtrader, it isn’t as nice as TD Ameritrade but when you compare the commissions, IB is my preferred broker. One thing that IB has problems with is customer service, in which TD supersedes it, but you win some, you lose some.


            It’s tough to start writing about this broker because it’s not the greatest broker out there. So why am I adding a SureTrader review? Well, their commissions aren’t bad, being at $4.95 per trade, but there are many negatives and one big positive to point out. Uploading your money to SureTrader is a relatively quick process (of course they want your money as quickly as possible), but what pisses me off is how long it takes to withdraw money. Also, they have ridiculous withdrawal fees and monthly charges. What makes this broker shady is that they are offshore, so they are not subject to the same laws. This also works in their benefit because they are not bound by the SEC’s pattern day trading rules which requires you to have a minimum of $25,000 in order to make more than 4 day trades within five business days and some other bogus rules. Still, there aren’t trades every day so this may prevent you from making stupid decisions and only playing the sure stocks that match the patterns. Many people use SureTrader because it has shares to short, but many people reserve them way ahead of you so this broker is not that beneficial.


            This broker may not be ideal choice for you if you want to short stocks, as they don't have most of them available, but if you're trying to catch these stocks as they shoot up and rise exponentially, this could be the trader for you. The cost of each trade is $7 and you can easily afford that when you make it on time for the pumps that the mailers and marketers put out. They do, however, charge 1/2% transaction fee for any stocks under $1 so if you trade these small ones the fees will add up over time. Their customer service won't be as good as the big guys but that's a trade-off.

So which of these is the best broker for penny stocks? It’s all a matter of what works for you and what your conditions are. If you’re shorting micro cap stocks then these three (sans Scottrade) are the most likely to have stocks to short so you have to see which one’s benefits outweigh its negatives. Ask away in the comments section.

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