Choosing a Penny Stock Broker

Penny Stock Brokers

Here’s how to choose the best penny stock broker quickly and easily; everything you need to know, all the right questions to ask. Your guide to penny stock brokers.

There are a lot of online brokers you can choose from with low commission rates. Speak to several online discount stockbrokers like Scottrade, E*TRADE, Zecco, TD AMERITRADE, or OptionsXpress. Visit their websites to determine their transaction fees or commissions, withdrawal options, research tools, and reliability of their services.

Greedy Brokers:

Be aware that some brokers will grumble about penny stocks and may try to talk you out of them. This is not for your benefit, but rather their own, because they don’t make as much in commissions trading $300 of penny stocks.

You have to realize that the brokerage firms are a well-oiled advertising machine for the large-cap companies to sell their stocks. That’s where they make their commissions. But for investors that know where to look, the highest profits come from penny stocks of small companies with big prospects.

As a result of this many of them may try to charge extra fees. You’re trying to make money without having to line the pockets of greedy stock brokers. Keeping trading costs down is essential.

Find the right stock broker for you. You want to find a stock broker who is both trustworthy and fair with commissions or fees. You should also consider the cost of opening an account with a broker. You generally have to pay a fee and some brokers will charge you, even if the account remains dormant.

It can be a little time-consuming to find the right broker, but worth a little up-front effort. Be sure to ask if they have additional fees for trading penny stocks. Make sure you understand their commission structure.

Flat Rate Commissions and No Account Minimums:

When last checked, both Zecco and TD AMERITRADE have flat rate commissions on penny stocks, with no extra hidden charges. Check which has lower flat rate commissions; probably Zecco. A flat rate commission will be the same charge per trade regardless of stock price.

Check that there are no account minimums. Some brokers have no account minimums. If they do, find out what is the required minimum account.

Make sure there are no inactivity fees, no minimum account size, and no extra charge for broker assisted trades.

Some brokers give preferential customer support and free benefits such as trading tools, news, research, etc. as a reward system depending on how much trading you do with them.

I think you probably get the picture by now… if you are looking for a discount penny stock broker, be sure to know all the charges before trading.

SEC Requirements of Penny Stock Brokers:

There are also SEC requirements of penny stock brokers that you should be aware of, including what documents and disclosures the SEC requires your penny stock broker to give to you before, and after, you have purchased your penny stocks. The SEC also gives you recourse to file complaints if your broker does not follow these requirements. You can see “SEC Requirements of Penny Stock Brokers” for more information.

Open Your Brokerage Account:

Once you find one you like, open a trading account with the stockbroker by just following the steps on their website.

Fund your trading account. A majority of online brokers allow you to fund your account through bank-to-bank wire transfers, cashier’s checks, personal checks and money orders.

A budget of $1,500 to $2,000 should be enough to get you started, but you can decide what is best for you. The advantages of penny stocks are that you can start with just about any amount you feel comfortable with. Regardless of amount, I recommend you keep to a budget when you’re first starting.

Big opportunities in penny stocks are just beginning now. Get in on the ground floor, and in the coming years, you should see unprecedented gains in the prices of penny stocks as entrepreneurs seek out new opportunities in growth sectors such as alternative energy, mining, biotech, technology, and dozens of other industries. Good luck.