The Webs most comprehensive review and comparison of the leading US Brokers specifically tailored for the requirements of investors who want to trade or invest in Penny Stocks. Amazingly only 5 Brokers out of 20 reviewed made the list.
We evaluate the brokers with the lowest commissions, the best free and low-cost trading platform software, and the lowest account minimums.
We also answer many of your important questions about Penny Stocks in our FAQ section.
- Firstrade – ZERO Commissions – Free Stock Trading $0 – A Very Good Free Trading Platform – $0 Account Minimum
- Interactive Brokers – Low Commissions $1.00 – Account Minimum $10,000 – Great Tools
- TC2000 Brokerage – Commissions $4.95 – Best Platform for Penny Stock Trading – Account Minimum $2,500
- Ally Invest – Commissions $4.95 – Account Minimum $250 – Excellent Customer Satisfaction
- Lightspeed – Low per Share Commissions $0.0045 – Fast Execution & DMA – Account Minimum $10,000
1. Firstrade: Best Penny Stock Broker With Free Stock Trades
Recommended for Penny Stock Investors seeking super low commissions on stocks and options, full Morningstar research access, and 5-star customer satisfaction.
There is a lot to love about Firstrade. Firstly they have commission-free stock trades, options trades, ETF & Mutual trades. This clearly stands out as an industry leader.
Announcement: On August 23, 2018, Firstrade made a move to complete Commission Free Trading. Now they have officially the lowest in the industry with ZERO, yes ZERO commissions.
What really stands out is the unique offering of over 2,200 commission-free Exchange Traded Funds (ETF’S) on offer. That is over twice as many as the next best competitor TD Ameritrade, even though you are trading penny stocks, you may want to diversify into ETF’s.
You also get completely cost-free access to the suite of MorningStar research; only three other brokers offer free research of this quality.
The Firsttrade Trading Platforms Firstrade Navigator, Options Wizards, and Real-time Watchlists hold up well against the competition.
And finally, a 5-Star Customer Satisfaction Rating rounds of the package for an excellent Brokerage for mid to long-term investors.
|Visit Firstrade||Read the In-Depth Firstrade Review|
2. Interactive Brokers: Trade Penny Stocks Globally With One Account
Ideal for Active Investors, Day Traders & Penny Stock Trader seeking the low trading commissions & best in class margin costs. But you will need $10K to open an account
No review would be complete without the grandfather of online discount brokers. Not only is Interactive Brokers (IB) a long-established company, it is also big. It has a complete set of services, enabling you to trade practically anything on any market. Stocks, Options, ETF’s, Mutual Funds, Bonds, Foreign Exchange, and even futures and commodities.
Usually, when a company is well established and large, it loses its competitive edge, not so with Interactive Brokers.
The industries lowest commissions on Stock Trades at $1,- and great commissions on Options demonstrate competitiveness. They also have the lowest margin interest rate in the review, in fact, probably in the industry.
When it comes to the trading platform, there is no additional costs, Web Trader, and TWS are all free.
Interactive Brokers caters to the more professional investor, or at least those with a minimum account balance of $10,000. Also, you will need to have a balance of $500,000 to be able to trade Forex.
Another huge bonus is that IB manages to throw into the package Zacks and Morning Star research for free, including real-time news.
IB manages to span the divide between Day Traders and Long-Term investors, and that is not easy. If you plan to span those worlds, also IB is a natural choice.
|Read the In-Depth Interactive Brokers Review||Open an Interactive Brokers Account|
3. TC2000 Brokerage: Scan Entire Markets for Penny Trades
Recommended for Penny Stock Investors buying Stocks & Options directly from Charts using award-winning TC2000. Also, take advantage of incredibly low margin rates.
TC2000 Brokerage is a relatively new offering from Worden Brothers Inc. This is a well-established company offering one of the best Stock Market Analysis Software Packages around. The logical step for Worden Brothers was to expand into the Brokerage side of the business.
And boy, they did a good job. They offer Stock Trade commissions at $4.95, $2.- less than TD Ameritrade and Merrill Lynch, and their options trade fare even better at $2.95 + $0.65 per contract.
They surprisingly lead the pack in Margin Interest Rates. When you buy a stock with margin, it enables you to leverage that stock with borrowed money. This is traditionally where brokerage firms make a lot of profit through this lending.
However, TC2000 Brokerage does not take advantage of the client in this area and simply offers very low-interest rates of 3% to 4.2% on the margin loans.
The icing on the cake, though, is that you get to trade directly off the charts with TC2000. TC2000 enables real-time fundamental and technical screening of the entire stock markets, including ETF’s, and enables you to easily create indicators from market conditions. Not only that, but the options trading in TC2000 is also arguably the best in the industry.
TC2000 Brokerage only offers trading in Stocks, Options, and ETF’s, but is this is all you need, then this is a first-class operation that should meet your needs.
|Read the In-Depth TC2000 Brokerage Review||Open an Account with TC2000 Brokerage|
4. Lightspeed: Fast Direct Market Access for Penny Trades
Perfect for Penny Stock Traders seeking fast execution & very low commissions for higher volumes. A very good customer satisfaction score and a good suite of tools make this a good choice.
|★ Fast Execution|
★ Very Low Commissions
★ Good Customer Satisfaction
★ Good Trading Platform
|✘ $10K Account Minimum|
✘ No In-house Research
Lightspeed is a well-established division of Lime Brokerage. They are clearly targeting active traders with their service offerings, specifically in the commissions, execution speed, and trading platform area.
You can choose a per-trade commission, which starts at $4.50 per trade for under 250 trades per month. But as you scale up your trading, the costs go down to $2.50 per month. Alternatively, they offer a per-share commission of $0.0045 per share, scaling up to $0.0010. I am a big fan of having the choice of rates, and out of all the broker reviews, only Lightspeed, Interactive Brokers, SpeedTrader, and SureTrader offer this.
Their trading platform is also a solid offering with in-house developed LightSpeed Mobile & Lightspeed Trader and also the very respectable offering of RealTick Pro & LiveVol X Platform. What is nice if there is no overt extra monthly cost for the tools, but there is a small transaction commission depending on the platform you use.
Lightspeed is targeting those who have larger trading volumes as the minimum account opening balance is $10,000. For that $10,000, you get a broker with great customer satisfaction ratings and fast execution at competitive commission rates.
|Read the In-Depth Lightspeed Review||Open an Account with Lightspeed|
5. Ally Invest: Low Account Minimum for US Penny Traders
Best match for Penny Stock Investors seeking low commissions, and low account minimum balance of $250, with a great customer satisfaction score.
|★ Competitive Commissions|
★ $250 Account Minimum
★ Great Customer Service
|✘ Higher Margin Costs|
✘ No News or Research Services
Ally is not just a broker; they are a financial institution offering banking, credit cards, home loans, and auto finance and insurance. After the acquisition of TradeKing in 2016, they branched into trading & brokerage services.
This acquisition seems to have worked well as they have a very competitive suite of investing services and excellent customer satisfaction scores.
Stock trading commissions weigh in at $4.95 per trade, and for larger volume traders, there are discounts available.
If you have a trading balance of $100,000 and or make more than $30 trades per month, the cost drops to $3.95. Also, the Options trading costs drop from $4.95 +$0.65 per contract to $3.95 + $0.50 per contract, making them more competitive than TD Ameritrade, Fidelity & Merrill.
Ally also offers the full suite of vehicles such as Stocks, Options, Bonds, ETF’s, Forex, and even Commodity Futures.
If you are looking for an institution to provide competitive rates across the full suite of investing and banking services, the Ally could be a very good choice.
Ultimately there are pros & cons to each broker; the table above seeks to find the best mix of services. What is best for you is what matters, if you are looking for the lowest commissions, best trading platform or low account minimum balance, keep reading below.
- Interactive Brokers – Huge Powerful Platform – Web Trader – TWS – Real-time News & Research – $0
- Firstrade – Very Good Platform – Firstrade Navigator – Real-Time Watchlist – MorningStar Research – $0
- Lightspeed – Very Good Platform – Lightspeed Trader – LiveVolX – Fast Execution – $0
- Ally Invest – Good Platform – Web Only – Includes Banking Services – $0
1. Interactive Brokers: Powerful Trading Platform
A truly outstanding trading platform based on Trader Workstation (TWS).
It is free to download and use as a client, and it is the single place to be able to trade any and every one of the vehicles on offer from IB. It caters to everything Stocks, Options, Futures, Forex, Bonds, Mutual Funds & ETF’s.
Not only that there are a huge number of advanced add-on tools that plug into TWS such as:
- ChartTrader – for trading directly from charts.
- Continuous Futures – for commodity futures scanning and analysis.
- DepthTrader – for deep analysis of market liquidity
- OptionTrader – deeper Options Analysis with specific Options strategies
- ProbabilityLab – to test the Probability Distribution of a particular trade
In total, there are 27 different advanced trading tools to suit every possible approach to the market.
Interactive Brokers Trader Workstation Video
|Read the In-Depth Interactive Brokers Review||Open an Interactive Brokers Account|
2. Firstrade: Great Options & Stocks Trading Platform
Firstrade has completely rebuilt its trading platform from scratch, and the improvement is dramatic.
Gone are clunky java programs, replaced by a fast HTML 5.0 platform. This platform is future-proofed and highly scalable. The user experience is clean, intuitive, and easy to learn.
Also, what we like is its price – Free.
The trading platform has a number of components. The web-based platform is available for all clients, and if you have an account balance over $10,000, you will have complimentary access to Firstrade Navigator, a downloadable, more powerful trading experience.
Web Trading Platform – Heatmap & Sector & Industries Tool
To be able to find a potential opportunity to trade, you can start with the big picture view of the market and drill down from there. The heatmap is designed for short-term traders who need to see where the price action and volatility are on any given day.
Alternatively, you can utilize the sectors and industries tool to evaluate past performance and select a sector to review in more depth.
Web Trading Platform – Advanced Screener, Fundamental Data & Event Calendar
No product set would be complete without the ability to scan and screen for stocks based on the fundamental data. Firstrade attempt at this is pretty good. It does not match the offerings from TradingView or TC2000, but it is adequate for most investors.
A new event calendar is also available, which is neatly broken into tabs for Earnings Announcements, Dividends, Ratings Changes, Economic Indicators, IPOs & Splits.
Web Trading – OptionsPlay
Firstrade put a lot of effort into the Options Trading Platform OptionsPlay. A first-class platform that focuses first on what kind of options strategy you want to implement. You can drill down through industries and sectors, and you instantly get a technical analysis for the stock, the bullish or bearish score. You can even sort your watchlist based on the bullish or bearish score.
The image to the right shows the OptionsPlay Bullish and Bearish Ratings based on three scenarios based on if you are feeling bullish or bearish about the stock or index.
- Strategy 1 – Selling 100 Shares of the stock – A Bearish Strategy – Cost would be $6764 – with a mediocre score of 96 for the trade
- Strategy 2 – Buy the June 9 Put Options – Bearish – Cost $185 – Low probability Rating of 74
- Strategy 3 – Buy June 9 Put Vertical – Bearish – Cost $147 – High Probability Rating of 104
I really like the implementation here, simple and implementable.
Firstrade OptionsPlay Trading Platform Walk-through
See how the whole OptionsPlay functionality works in the image below to get an overview of the functionality.
- Immediate feedback into the 1 month and 6-month trend for the stock.
- This particular fund is has a rating of 88 for a bullish strategy, but only a 35 rating for a bullish options strategy. The beauty of this is you can compare where you should buy the stock or utilize an options strategy.
- The ability to then sort your list on the strongest score is excellent functionality.
- Finally, the Profit & Loss simulator is really good as it enables you to try to predict what your profits would be depending on how much you invest in the strategy.
Watch the “How to Trade Options Like A PRO” Video from Firstrade
See OptionsPlay in action in this detailed video
3. Lightspeed – Real-time Volume & Trading Experience
How do you find the stocks that are in-play, have high volatility, and are in a strong trend? This is the job of the trading platform.
You need your trading platform to be fast, intuitive, and powerful. LightSpeed has a very well thought out portfolio of integrated trading platforms to suit their customers.
Lightspeed Trading Software Targeted to Investors
For investors, who will typically have fewer trades and less demand for L2 quotes and tick by tick streaming charts, Lightspeed has a nice solution in LightSpeed Web / Mobile Trader and LiveVolX
For Web Trader and LivevolX, there are zero data fees & zero monthly costs, which is great. As part of the free package you get:
- Streaming L1 Quotes
- Equities & Options Trading
- After Hours Trading
- Market Scanners
- Customizable Charts & Studies
- LiveVolX provides an advanced Options Trading Platform
So a solid platform offering for investors, but what about professional and active investors?
4. Ally Invest: A Weak Platform
If you favor being able to manage all your Ally services in one place, over having powerful scanning and fundamental screening or a wealth of expert advisors or studies, then Ally is for you.
Ally Invest does not have the strongest suite of tools available in our Top 10 US Stock Brokers Review.
Ally has launched it’s “Ally Invest Live” Html 5 trading application, but it still does not cover all trading vehicles and does not compare to competitors like Firstrade, TC2000 Brokerage, or Interactive Brokers.
1. Worden Brothers Inc: TC2000 Trading from Charts
How do you find the stocks that are in-play, have high volatility, and are in a strong trend? This is the job of the trading platform.
Worden Brothers continue their winning ways, with very competitive pricing starting at only $10 per month for the Silver package. I would recommend Gold to start with as you get a more powerful alerts engine and unlock the huge power of the Technical & Fundamental Scanning and Filtering that TC2000 is famous for.
TC2000 is aimed squarely at those trading Stocks, ETF’s, Mutual Funds and Options only, specifically on the US A and Canadian Markets.
The software is first class, runs on PC, Mac and Tablets SmartPhones, and requires Zero complex configuration.
Support is excellent both on the forums or via the phone, where you get to speak immediately with skilled personnel in the US.
If you trade U.S. Stocks, ETF’s or Mutual Funds, then this is a great solution. Worden also provides regular live training seminars that are of very high quality and also tour the US A with free live training seminars for subscribers.
Worden Brothers make a clean sweep when it comes to trade management, with full Broker Integration (as long as you choose them as your broker).
TC2000 also offers fantastic Options trading and integration; you can scan and filter on hundreds of Options strategies and then execute and follow them directly from the charts.
Good Profit & Loss tracking & Analysis round off the package.
How to Execute Orders from the Chart with TC2000 Brokerage – Video
Fundamental Scanning and Screening
Make no mistake about it, if you want fundamentals stock screeners in real-time layered with technical screens all integrated into live watch lists connected to your charts Telechart is a power player.
I selected TC2000 as my tool of choice back in the year 2000 because it offered back then, simply the best implementation of fundamental scanning, filtering, and sorting available on the market. Decades later, they are still a leader in this section.
They offer a huge selection of fundamentals to choose from, but what makes it unique is the fact you can, with a few clicks, create your own indicators based on the fundamentals.
You can then overlay the indicators directly on the charts, which opens up a whole new world and technical and fundamental analysis. 10 out of 10 for TC2000 again.
- Firstrade – Stock Trades & 2,000 ETF Trade $0
- Interactive Brokers – Stock Trades $1.00 or Per Share Commissions $0.005
- Lightspeed – Stock Trades $4.50 – High Volume Traders Discount to $2.50
- Ally Invest – Stock Trades $4.95 – Further Discounts for Higher Volumes Available
- TC2000 – Stock Trades Flat Fee $4.95 – No Hidden Costs
- Firstrade – Minimum Deposit $0
- Ally Invest – Minimum Deposit $250
- TC2000 Brokerage – Minimum Deposit $2,500
- Interactive Brokers – Minimum Deposit $10,000
- Lightspeed – Minimum Deposit $10,000
Here you can find the table containing all the data in one place. Use the search box to filter on a particular item you are looking to compare. For example, type “Fees” or “Commission” and you will get only the relevant rows to compare.
To be sure we are talking the same language, we start with some frequently asked questions (FAQ’s).
What Are Penny Stocks?
Originally Penny Stock signified Stocks selling between 1 to 99 cents per share. But today, Penny stocks mean different things to different people. The Securities & Exchange Commission (SEC) refers to penny stocks as anything traded at under $5 per share.
For others, Penny Stocks can also refer to anything traded off the main exchanges like the NYSE or NASDAQ. These off the exchange trades are usually traded via the OTC (over the counter) or Bulletin Boards (BB) / Pink Sheets.
So let’s be clear, we can break down Penny Stocks into two main categories. Listed (on a stock exchange) and Unlisted (OTC or Bul.
Listed Penny Stocks:
- Trade for less than $5.00
- Are available through any normal broker
- The chart data & fundamentals are available through all stock market trading platforms and software.
- Subject to audits and regular filings
- Have mostly reasonable liquidity (enough buyers and sellers to make a functioning market)
Unlisted Penny Stocks
- Trade for a few cents or fractions of a cent
- Markets are made by individuals, not computers meaning possible price manipulation.
- Potentially subject to manipulation due to lack of liquidity
- Exploited by Penny Stock Promoters & Get Rich Quick Schemes
- Are not subject to audits and regulatory filings
This article is referring to Penny Stocks Listed on the major stock exchanges only. We do not recommend any investing or trading in Unlisted stocks whatsoever.
Are Penny Stocks Worth the Risk?
Unlisted Penny Stocks traded “Over the Counter” are definitely not worth the risk, I strongly advise against this kind of trade and following any “Penny Stocks Newsletter.” Find out more about this type of market manipulation here.
Listed Penny Stocks on major exchanges may well be worth the extra risk if you know you are taking the risk. You need to be able to apply technical analysis to analyze the supply and demand of the stocks, therefore getting an edge in the market by having a higher win rate than 50%.
You also need to be able to find the right stocks to trade. You need to be able to scan or screen for stocks that meet the right criteria.
How do Penny Stock Operators Manipulate Stock Prices?
There are two ways to manipulate stock prices on Penny Stocks. The first is widening the spread (the difference between buy and sell prices). The Second is manipulating people to buy a penny stock, therefore enriching the current stockholders who will then sell at a profit.
Spread Widening – is not strictly illegal. If there is a lack of liquidity (buyers and sellers) and a buyer wants to purchase a large amount of stock, then the price may artificially inflate to entice new sellers into the market. If this is an OTC (over the counter) stock and there is only one market maker, they can essentially set whatever spread they like. Where there is a lack of liquidity, we often see widening spreads.
People Manipulation – There are a number of businesses out there that peddle “Hot Stocks Newsletters” or “Penny Stock Newsletters” most of these businesses operate under a clear conflict of interest. Known as “Pump and Dump,” these companies will often be paid in stocks of the company they are promoting so that they market the buying of the stock to their mailing lists. The innocent people buy the stock, and the company owners and marketing firm then sell when the stock rises. This means that all the insiders win, and the retail investors lose.
Do People Get Rich Trading Penny Stocks?
Many people claim to get rich from trading Penny Stocks, but the evidence is very thin on the ground. No one ever got rich from trading illiquid Over the Counter (OTC) or Bulletin Board (BB) stocks.
Trading micro-cap (low capitalization companies) that are publicly listed corporations is a possible way to make money. With a very strong understanding of technical analysis and industry insight, you can make good money by trading the swings in stock price.
However, there is more evidence that investing long-term, in small capitalization companies, with a bright future, unique market-leading products, and a great management team yields much better results. All great companies started out with low stock prices.
Would you believe that Netflix (which I currently own) in October 2002 had a stock price of $0.64? It is now worth $394 a return of 114,055% or 7,000%+ per year—long-term investing works.
How many Penny Stock Firms are there in the US?
Of the 8200+ companies listed on the NYSE and NASDAQ stock exchanges, 891 have a stock price of less than $5.00, which means 11% of the US stocks are penny stocks.
How Much do you need to Start Trading with Penny Stocks?
To start trading in Penny Stocks, you need to be able to fund a minimum account balance. While some brokers offer “No Account Minimum,” you will still need money to trade. If your average trade cost is $5 to buy and $5 to sell a stock and you buy only $100 worth of stock, your costs for the trade would be 10%. Having to make a 10% profit just to break even is very difficult. I would recommend a minimum amount of money to be $1,000, which makes your costs (or slippage) 1%.
How to Invest in Penny Stocks without a Broker?
There are two ways to buy penny stocks without a broker.
- You can use a brokerage that enables direct market access (DMA); this means you will have direct access to the investment banking and dark pool markets, thus avoiding the costs of a discount broker spread.
- If you consider a broker as a human being you speak to over the phone, then you can avoid using this type of broker by entering your trade directly into the online brokerage system. The costs per trade are usually about $5 compared to $40 for a human broker over the phone.
Related Article: How To Buy Stocks Without a Broker
How to trade penny stocks online if I don’t live in the USA?
You can trade the US stock markets and Penny Stocks directly in the USA if you are resident in a country that has a tax treaty with the USA.
The US has a series of tax treaties with many countries. This means if you are non-resident, meaning you live outside the USA, you can trade and profit in the US without having to pay “withholding tax” in the US.
Withholding tax is a tax on your investments applied when you actually sell a stock. Withholding tax is applied to all those people who do not have valid tax credentials in the US Withholding tax is at 30%. This means that if I buy stocks for $1000 and I sell them a few days later for $1,000, I will pay $300 tax. It is like an emergency tax because you do not have a valid tax code.
If you are non-resident, meaning you are living in the UK, France, Germany, Belgium, Spain, Canada, Australia, New Zealand, India, China, Italy, or Greece and many more, you cannot get a tax code in the US.
In fact, you do not need a tax code.
The US has a tax treaty with many countries meaning that you can actually be exempt from all TAX in the US and simply declare your profits in your home country and pay the tax at your local rate to your tax authorities at the end of the year, this is called a double taxation treaty.
So, apply to your US Broker of choice and complete a W8-BEN form and fund your account and you are ready to go.
Related Article: How to Trade in the USA as a Non-resident
How would you invest in Penny Stocks?
Short-Term Trading in Penny Stocks means you are looking for volatility in stock price. You are looking for stocks with high short-term percentage moves. You will need a stock market trading software platform that allows you to quickly find the stocks in play by using real-time screening.
Long-Term Investing in Penny Stocks means you need to be on the lookout for truly innovative companies with products and services which can scale, provide industry-leading value, and are showing signs of:
- Year on Year Revenue Growth
- Year on Year Sales Growth
- Showing Earnings (EPS) Growth
We have a Stock Market Investing Course designed to empower you to do just that.
Example of a Short-Term Trading Plan for Penny Stocks
In this example, I am using TC2000 Brokerage and TC2000 Software.
Firstly – set up a watchlist that covers the entire U.S. Stock Markets; AMEX, NYSE, NASDAQ.
Set up a real-time scanner to filter on:
- Stock Price Under $5
- Volume Surge Greater than 50% (Volume greater than 50% of yesterdays volume)
- Float (shares available on the market to buy) less than 50 million – limited stock available to buy
- Company Market Capitalization Great than $50 Million – filtering out the really small worthless companies
- Volume greater than 50,000 shares daily
This is an example – see disclaimer.
What Should I Look For in A Penny Stock Broker?
As an investor or trader in penny stocks, you are looking for the ideal mix of:
Low Commissions with no hidden costs – if you have a limited amount to invest, commissions can eat away at your profits, so low commissions are very important.
A Good Trading Software Platform – which will allow you to scan on price action and volatility in real-time if you are looking for short-term trades, or a platform that allows you to scan for strong fundamentals like sales, revenue and earnings growth.
A Small Account Minimum – if you have only $1000 to invest there is no use in considering a broker that requires an account minimum of $10,000
Notes on the Review
Customer Satisfaction Score (Star Ratings)
The customer satisfaction score was compiled using the following methodology.
The Twitter Accounts of the Brokers were scanned back for the one year for any negative feedback from customers. Also, TrustPilot UK and USA were reviewed, and any negative comments counted against the broker. These two sources of information were combined to provide the star rating you see below.
★★★★★ – No Complaints & Positive Recommendations (1 year)
★★★★ – No Complaints (1 year)
★★★ – < 10 Complaints (1 year)
★★ – 10 to 20 Complaints (1 year)
★ – > 20 Complaints (1 year)
Partnerships & Special Bonus
Liberated Stock Trader has partnerships with most of the service providers in this review. This means if you find the review useful and purchase any of the services mentioned we will receive a small payment which goes towards funding the research and work we do.As a thank you for using our reviews and purchasing any of the services mentioned we would like to offer you a special bonus of the highly rated Liberated Stock Trader "How to Avoid the Next Stock Market Crash" eBook and Video Course worth $29.-. Simply contact us specifying which service you signed up for and we will send you your gift.
Over 2000 data points were collected during this review. Brokers change services, terms, and commissions on a regular basis. If you represent a Brokerage House or are a client and you spot an inaccuracy, please leave a comment or contact us here, and we will endeavor to correct it.