Penny stocks typically refer to small companies that are up and coming. In the US, this is any stock that is trading at $5 or less. Other regions have different definitions, albeit, most penny stocks come with a much higher risk/reward ratio than traditional blue-chip shares.
In this guide, we review the best online brokers for penny stocks. We also discuss the many metrics that you need to consider when trading this asset class and how you can get started with a penny stock brokerage account today!
In This Guide
The best penny stock trading platform of 2021 can be found below. Scroll down for a full review of each broker to ensure you find a platform that meets your needs!
When searching for the best penny stock trading platform for your financial goals – there are many factors that you need to consider.
For example, what penny stocks does the broker give you access to, and how much you will be charged in commissions? You also need to explore the minimum deposit/trade size and whether or not the broker is regulated.
Taking all of this into account, below we review the best online brokers for penny stocks of 2021!
If you’re looking for the cheapest way to trade penny stocks in terms of low-cost fees and asset diversity – look no further than eToro. This top-rated brokerage site – which now boasts over 20 million clients, allows you to buy, sell, and trade over 2,400 stocks.
This covers more than 17 international stock exchanges – so creating a diversified portfolio of penny stocks can be achieved with ease. For example, hundreds of UK-listed stocks are covered – most of which hold a share price of less than £1. You also have markets in the US, France, Hong Kong, the Netherlands, Germany, Sweden, and more.
Regardless of which penny stocks take your fancy, eToro allows you to enter and exit the market commission-free. This means that you won’t be charged when you buy penny stocks nor when you cash out. There are no ongoing platform fees, deposits cost just 0.5%, and withdrawals will cost you a mere $5. Plus, the platform supports a full suite of payment methods – so getting money in and out of your eToro account is simple. This includes debit/credit cards, bank transfers, and even e-wallets like Paypal.
eToro also stands out for its fractional shares tool. This allows you to buy penny stocks from a minimum investment of just $50. As such, the broker is great for trading with small amounts. Additionally, eToro also allows you to automated your penny stock endeavors through its Copy Trading tool. This allows you to select a seasoned stock trading pro and copy them like-for-like. There are also CopyPortfolios – which are professionally-managed by the eToro team.
This covers dozens of strategies – including everything from vaccine stocks and dividend stocks to renewable energy stocks and growth stocks. When it comes to the safety of your funds – this hugely popular penny stock trading broker is regulated by the FCA, ASIC, and CySEC. It is also registered with FINRA in the US. Finally, you can open an account at eToro in minutes online or via your mobile phone. Besides its online platform, there is also an eToro trading app that is available on iOS and Android devices.
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
If you're a casual retail investor that is looking for a simple and jargon-free broker - Robinhood is potentially the best penny stocks trading platform for you. This is because both the online website and mobile trading app are perfect for newbies.
In fact, there is no minimum deposit or trade size when you buy stocks at this broker - so it's also ideal if you have little to no experience of online trading. In terms of what's supported, Robinhood is home to over 5,000 stocks.
Apart from a few hundred international shares, these are all US-listed. Now, we should note that Robinhood isn't a specialist penny stock broker. On the contrary, the platform offers stocks and shares of all shapes and sizes. But, the platform offers a really useful filter tool that allows you to find the best penny stocks currently in the market.
All you need to do is head over to the stock trading section, choose the sector that interests you (e.g. energy and water, food and drink, consumer goods), and then specify a maximum share price of $5. After all, a share price of less than $5 meets the SEC definition of a penny stock.
Once you have found a penny stock that interests you - there is no minimum investment amount. As such, you can diversify across dozens or even hundreds of penny stocks to mitigate your risk. We should also note that Robinhood does not charge any trading commissions - so it's only the spread that you need to look out for.
If remaining on the Standard account, there is no monthly fee or surcharges, either. You might consider upgrading to the Gold account, as this gets you access to leverage and more advanced data feeds. This will set you back just $5 per month. Either way, deposits come in the shape of a US bank wire or ACH. Whether or not you benefit from an instant deposit will depend on your account type.
Your capital is at risk.
If you are looking to trade penny stocks in the truest sense - you will need to choose a broker that gives you access to the OTC (Over-the-Counter) markets. After all, penny stocks typically trade on the OTC Pink Sheets -or ArcaEdge.
These markets are usually only accessible to institutional or accredited investors and require much larger minimums than retain clients are prepared to meet. Nevertheless, one of the best penny stock brokers to access the OTC markets ad a retail client is Interactive Brokers.
Once you go through the initial sign-up process and verify your identity - Interactive Brokers allows you to buy and sell thousands of penny stocks from a variety of US-based OTC markets. When it comes to pricing, US-listed stocks on the NYSE and NASDAQ can be traded commission-free.
However, this isn't the case when trading penny stocks on the OTC. Instead, you'll need to pay a commission - which will vary depending on your account type and trading volume. Outside of the US-listed penny stock scene, Interactive Brokers gives you access to 135 markets in 33 different countries.
Here, you will find thousands of penny stocks that are priced at less than $5 per share. On top of stocks, Interactive Brokers also offers funds, ETFs, options, futures, and even forex. What we really like about it this broker is that there is no minimum deposit. Debit/credit cards are not supported though - so you'll need to perform a bank transfer.
Interactive Brokers fees
One of the best ways to trade penny stocks from the comfort of your home is through a CFD trading platform like Libertex. This means that you won't own the underlying penny stock - as you are merely speculating on its future price.
With that said, Libertex allows you to trade penny stock CFDs on a long or short basis. In other words, not only can you speculate on the price of the penny stocks going up - but down, too. This offers much more flexibility in comparison to a traditional stock brokerage site.
Moreover, Libertex also allows you to trade penny stocks with leverage. Your limits will be determined by your location - but this typically stands at 1:10 for non-UK and European clients. These regions are capped at 1:5. Either way, applying leverage on your penny stock trades at Libertex gives you much more in the way of purchasing power.
Libertex also stands out as one of the best penny stock trading platforms as it charges tight spreads. This is particularly useful when trading penny stocks - as you will often find that the spreads are much wider compared to conventional blue-chip shares. When it comes to commissions, most stocks at Libertex can be trading fee-free.
Some stocks and other assets on the platform come with a small commission that rarely surpasses 0.2%. Libertex is also a great option if you want to trade via MT4. As you likely know, this platform comes packed with advanced orders and technical indicators - making it perfect for seasoned stock trading pros.
Alternatively, you can also use the Libertex web-based platform or mobile app. This is a bit easier on the eye and thus - the better option for newbies. If you like the sound of this two-decade-old trading platform, Libertex requires a minimum deposit of just $100 (and $10 on all subsequent deposits). This covers debit/credit cards, bank wires, and e-wallets.
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83% of retail investors lose money trading CFDs at this site.
Fidelity is a highly established online broker that is popular with active traders of all shapes and sizes. On top of blue-chip shares, index funds, ETFs, options trading, futures, and bonds - Fidelity offers a fully-fledged penny stocks trading platform.
Interestingly, although the SEC defines penny stocks as an equity worth less than $5 per share, Fidelity considers this at sub-$3. Nevertheless, you will have access to penny stocks via the main OTC markets as well as via small-cap listings. You will, however, need to go through a 'risk understanding' process before Fidelity gives you access to these markets.
This simply means that you accept the added risk that comes with buying and selling penny stocks. Perhaps the stand-out feature with Fidelity is that it doesn't charge any commission to access the OTC markets. This is unusual, as brokers typically charge a premium for this. Like most of its competitors, Fidelity also offers a $0 commission rate on NYSE and NASDAQ-listed stocks.
We should note that Fidelity isn't only suitable for US investors - as this brokerage site accepts account applications from several countries. This includes the UK and multiple EU nations. In terms of getting started, Fidelity doesn't have an account minimum policy in place. You will, however, need to go through a rather cumbersome KYC process before you can start on a trading account.
If you are looking to trade penny stocks on your phone - you'll want to choose a brokerage site that offers a top-rated mobile app. We found that TradeStation is the best penny stock trading platform for this purpose - as its iOS/Android application is really intuitive.
The app allows you to place buy and sell orders on your chosen penny stocks, check the value of your portfolio, and even perform research and technical analysis. We also like the alert function that the TradeStation app comes with.
This allows you to set a custom alert on a specific penny stock and thus - you'll receive a notification when this is triggered. When it comes to supported penny shares, TradeStation gives you access to the OTC stocks arena. Best of all, it doesn't charge any trading commissions.
However, if you end up purchasing more than 10,000 penny stocks via a single trade - anything above this figure will be charged at $0.005 per share. In terms of accessing OTC pricing data, this is charged at $5 per month. You might want to consider this, as penny stock pricing feeds are otherwise difficult to gain access to.
Your capital Is at risk.
Trading of any capacity is difficult at the best of times - especially in the case of penny stocks. As such, if you are completely new to this space - it's important to pick a user-friendly platform that is suitable for novices.
We found that that Capital.com is the best penny stock trading platform for beginners - as it allows you to get started with a minimum deposit of just $20. Plus, the trading platform itself - which you can access throughout your web browser or the Capital.com mobile app - is really simple to use.
Additionally, if you want to practice your penny stock trading strategies before risking real money, Capital.com offers a demo account facility. To ensure you improve your stock trading knowledge along the way, Capital.com offers lots in the way of educational tools and resources. This includes trading guides and mini-courses.
In terms of supported penny stocks - Capital.com gives you access to 18 exchanges. This covers markets in the UK, US, and Japan - as well as less liquid exchanges in Ireland, Spain, Russia, Hong Kong, Canada, Italy, and more. All of the penny stocks hosted at Capital.com can be traded commission-free.
As a disclaimer, the only trading fee that needs to be considered is the spread. This is usually very competitive on major blue-chip stocks - so expect to pay more on penny shares. Nevertheless, all financial markets at Capital.com come in the form of CFDs. Once again, this means that you can apply leverage and even short-sell your chosen penny stock.
As always, leverage limits will depend on your location and trading status. To benefit from the minimum deposit of $20 - you can choose from a debit card, credit card, or e-wallet. Finally, when it comes to safety, Capital.com is regulated by the FCA and CySEC. Take note, as a CFD-only platform - US citizens are not eligible to join Capital.com.
76.25% of retail investor accounts lose money when trading CFDs with this provider.
As you likely know - most investors consider penny stocks because of the potential of significant gains in a short period of time. However, penny stocks are speculative and highly volatile, meaning they are not overly dissimilar to cryptocurrency trading instruments.
Baring this in mind, it's crucial that you have a firm grasp of both the risks and potential rewards before you open an account with your chosen penny stock broker.
Here's what you need to know:
Baring this in mind, it's crucial that you have a firm grasp of both the high risks and potential rewards before you open an account with your chosen broker for penny stocks.
As we briefly mentioned earlier - there isn't a universally accepted definition for penny stocks. For example, the SEC (U.S. Securities and Exchange Commission) defines a penny stock as any traded equity with a share price of less than $5. Such a broader spectrum means that even though a company is classed as a penny stock by the SEC - it can still possess the characteristics of a more stable equity.
With that said, there are many subjective factors that typically define a penny stock - such as trading on the OTC markets, being overly volatile, and lacking liquidity. We cover this in more detail later on.
The main premise of penny stock trading works much like other investment scenes. That is today, you will be looking for an app to buy penny stocks and then sell them at a later date more than you initially paid. If you are able to do this, you will make a profit.
With that said, experienced traders will look to buy and sell penny stocks on a short-term basis. This is with the view of making small but frequent gains throughout the trading day.
A great option for short-term penny stock traders is to use a platform that supports CFDs. As we noted earlier, this gives you access to leverage and short-selling capabilities.
Put simply, people choose to trade penny stocks over regular equities because of the upside potential. For example, there are many cases where a penny stock has increased by 3 or 4-digit percentages in a matter of weeks. In comparison, it can take many decades for a blue-chip stock like Johnson & Johnson or Coca-Cola to generate similar returns.
After all, these are highly established companies with huge market valuations. But, in the case of penny stocks - these companies are often worth just a few million dollars. As a result, it doesn't take much price action for the shares to rise in value super-quickly.
The other reason why investors opt for penny stocks is that many of these companies are up and coming. That is to say, the firm in question might be involved in a new technology or an unproven business model that one day could make it big. But, as we cover shortly - most penny stock investments fail to generate any returns at all - so caution must be taken.
Additionally, we should also mention that investors are drawn to penny stocks because of the low share prices that are available. For example, when you invest in the likes of Amazon - you are paying over $3,000 for just one stock. But, if you were to invest in a penny stock with a price of $0.10 - you would be buying 30,000 shares.
On the one hand, picking the right penny stock investment could generate sizable financial returns - especially if you time the market correctly. However, penny stocks are fraught with risk - so make sure you read through the sections below before parting with any money.
As we briefly noted earlier, most penny stocks trade on the OTC markets. Much of this is dominated by the Pink Sheets market, although other platforms exist, too. The key problem here is that the OTC markets are very difficult to access as a retail client.
This is because the OTC market sees investors buy and sell penny stocks on a direct basis. As such, prices are agreed upon between the two parties.
This is completely different from buying shares on a public exchange like the NASDAQ or NYSE - as stock prices are based on market forces. This is why you need to go through a specialist penny stock broker.
Penny stocks are somewhat similar to digital currencies like Bitcoin, insofar that they are highly speculative and volatile. For example, if you pick the right penny stock at the right time - there have been plenty of instances where investments have ballooned 10-fold or even 100-fold in the space of a couple of weeks.
However, in many cases, penny stock prices can just as easily lose more than 90% in value - sometimes in days. As such, penny stocks will not suit you if you are looking to build a sensible long-term investment plan. Instead, they are suited to speculative traders.
Pump and dump schemes are notorious in the penny stock trading scene. For those unaware, this refers to a group of speculators that will collude with one another with the view of artificially pumping the value of the penny stock northwards. This is easily achieved in the penny stock space - as many companies have a very small market capitalization.
The idea behind this is to collectively buy a selected penny stock to drive the price up - to encourage unsuspecting investors to all enter ther market. This will result in the penny stock rising in value at an even faster rate.
Then, when the speculators are happy with their returns - they will collectively sell their penny stocks and cash in their gains. This is known as the 'dump' - as results in the penny stock crashing back down to where it began. This means that unsuspecting investors will be looking at significant losses.
Another major risk of investing in penny stocks is that most companies struggle to attract liquidity. For example, at the time of the writing, although the Pink Sheets market has over 11,000 securities listed, the total value of all these companies is just $3.5 billion! This means that there are very few buyers and sellers active in the respective market.
As a result, you will find that the 'spread' on penny stocks is often sky-high. This means that ther gap between the buy and sell price is wide - meaning that you are indirectly paying a large fee to enter or exit the market.
Another issue associated with low-liquidity is that it's all good and well being in profit - but you might struggle to find a buyer that is willing to take your penny stocks. Once again, this means that you will need to accept an unfavorable price for the deal to go through - so a good chunk of your profits are subsequently eaten away at.
Finally, and perhaps most importantly - when trading penny stocks that are listed on the OTC markets, you won't be accustomed to the same information as you get with regular shares.
However, these regulatory requirements simply do not exist in the world of OTC penny stocks. Instead, these companies are not obliged to release information to the public - meaning that you have no idea about the fundamentals of the firm's balance sheet.
So now that we have discussed the pros and cons of trading penny stocks - we are now going to talk about strategies. After all, if you are going to access a speculative market like penny stocks - you must have a clear set of goals in place.
To point you in the right direction, below we discuss a number of popular strategies that newbie penny stock traders might consider.
Perhaps the most important penny stock strategy to consider is that of a diversification plan. In a nutshell, this means that you should avoid putting all of your eggs into one basket.
Most importantly, you are spreading out your risk across 100 different companies - meaning you are not overexposed to a few stocks.
As we have repeatedly discussed in this guide, the definition of penny stocks will vary from jurisdiction to jurisdiction. Sure, most penny stocks are highly volatile, possess little liquidity, and trade on the OTC markets.
However, there are heaps of penny stocks that actually trade on public exchanges. For example, Nokia trades at less than €3.50 per share - even though it has a market capitalization of almost €20 billion. As such, in finding companies with a similar low stock price and large market valuation - you can avoid overly volatile stocks that attract low levels of liquidity.
If you're looking for the best penny stock trading platform because you want to buy low-valued shares - it might be worth focusing on the London Stock Exchange. Once again, this is because unlike the US markets - which are priced in dollars, UK shares are priced in pennies. As such, there are hundreds of mid-to-large cap UK stocks that are worth less than £1.
For example, the following penny stocks are all priced below £1 and most importantly - have a market capitalization of over £1 billion.
By choosing UK penny stocks that are listed on the London Stock Exchange at an FCA broker like eToro - you will:
So now that we have discussed the ins and outs of how the penny stock trading platforms work and what strategies you need to consider - we are now going to walk you through the process of making your first investment.
If you're looking to invest with the best penny stock trading platform in the market - consider eToro. You'll be able to invest commission-free across 17 international stock markets.
To get the ball rolling, visit the eToro homepage and open an account.
You will need to provide your personal information and contact details, as well as verify your mobile number and email address.
You will also be asked to upload a copy of your government-issued ID and a proof of address. In doing so, eToro will verify your account instantly and all restrictions will be removed.
In order to trade penny stocks at eToro, you'll first need to make a deposit. If you want the funds credited to your account instantly - opt for a debit card, credit card, or an e-wallet like Paypal, Skrill, or Neteller.
Although eToro offers more than 2,400 shares across 17 international exchanges - it doesn't offer a dedicated penny stock section per-say. Instead, you will need to find your chosen penny stock by using the search function.
Or, if you want to browse what penny stocks are on offer - click on the 'Trade Market' button. Once you click on 'Stocks', you can then use the filter buttons to narrow your search down by the exchange or sector.
In our example above, we are looking to trade UK-based business outsourcing firm Capita PLC - which is priced at just
Now that you have decided which penny stock you wish to trade - you will need to set up a market order. As Capita PLC has a market valuation of less than £800 million, we are going to keep our stakes very modest. As you can see from the order box below, we are investing just $50 into this penny stock - which is the minimum at eToro.
You will also notice from the above image that we are buying this penny stock on a commission-free basis! Finally, to complete our penny stock trade - we click on the 'Open Trade' button.
And that's it - you've just invested in your first penny stock! You can sell your penny stocks back to cash any time that the respective market is open. When you do,m the cash will be reflected in your eToro balance - when you can then withdraw ($30 minimum).
In conclusion, penny stock trading isn't for the faint-hearted. After all, penny stocks and not only speculative and highly volatile - but they usually suffer from really low liquidity levels. This means that you might struggle to find a buyer when you eventually decide to cash out.
Nevertheless, if this is an investment sector that interests you - we found that eToro is the best penny stock trading platform for 2021. With thousands of shares on offer across 17 markets - you can buy and sell penny stocks without paying any commission. The minimum trade size is just $50 too - which enables you to enter your chosen penny stock market with modest amounts.
If you're based outside of the US - the best online broker for penny stocks is eToro. This platform offers thousands of commission-free stocks - many of which are priced at $5 or less. If you are based in the US, then we found that the best online broker for penny stocks is Robinhood. Other popular platforms include e-trade, TD Ameritrade (thinkorswim), and Fidelity.
If you are looking for the best online brokers for penny stocks that give you access to the OTC markets - your best bet is Interactive Brokers. This top-rated platform gives you access to both the Pink Sheets and ArcaEdge.
There are many examples of a company starting off as a penny stock to then become a huge multi-billion dollar company. One such example in recent times is Monster Beverage Corporation. In the early 2000s, this company was trading at less than $0.06 per share. Fast forward to early 2021 and the same stock has since breached 52-week highs of $89.86 with a market capitalization of over $47 billion.
Are penny stocks worth it?
Conventional penny stocks that are listed on the OTC markets have tiny market valuations and thus - don't have the resources to pay dividends. Instead, the only way that you will make money by trading penny stocks is to correctly predict the future value of the shares.
If you are looking to begin your penny stock trading endeavours via a risk-free demo account - this is a great move. The best platform in this respect is eToro - which offers a demo account facility that comes pre-loaded with $100,000. Most importantly, the demo facility mirrors live market conditions.
Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Kane has also written for websites such as MoneyCheck, InsideBitcoins, Blockonomi, Learnbonds, Buysharesand the Malta Association of Compliance Officers.
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