Best Brokers For Penny Stock Trading of 2021

The easiest way to lose out on penny stock profits — aside from making bad trades — is paying unnecessarily high broker fees. The best brokers for penny stock trading don’t tack on any additional fees for trading a high volume of low-cost stocks.

Charles Schwab offers the most reasonable penny stock rates of any broker. It’s also a great platform to expand your portfolio outside of penny stocks, too. Its online educational resources are second to none, and it offers 200 commission-free ETFs to help you further grow your portfolio.

In this article

    The Best Penny Stock Brokers

    I looked at all the hidden fees or surcharges that many brokers like to tack on to penny stock trades, and found the ones that had the absolute lowest rates available.

    Not all “penny stocks” trade for a penny a share. Some trade for a little less than a dollar and some even trade for less than a penny at a fractional value per share. But regardless of specific price, any true penny stock is going to be an ultra low-priced investment on a per share basis.

    You need to keep your cost per share as low as possible to trade penny stocks effectively.

    Let’s say you only have $500 to invest in penny stocks. In theory, you can buy 50,000 shares of a stock priced at 1 cent per share.

    But in practice, there are going to be costs to any transaction. Let’s say your broker charges $10 to place a buy order and then another $10 to place a sell order. Minus those fees, you actually only have $480 to invest.

    And what if there are additional $30 costs specific to low-priced stocks because your broker isn’t very welcoming to aggressive penny stock investors? Now your $500 has turned into $450.

    In the grand scheme of things, $50 may not sound like a deal breaker. But that’s actually 10% of your initial $500 investment. And worse, that 10% is only lost on the front end. It can add up big-time in lost profits.

    Consider the following math based on a $500 initial investment:

    % PAID
    100% RETURN
    PROFIT $
    PROFIT %

    As you can see, it’s not just the lost money thanks to fees that matter, but the lost investment profits, since you can’t put that cash to work in the stock market after your broker takes a cut.

    What Makes a Good Penny Stock Broker?

    There’s always risk to trading stocks, and a lot of the big factors that can result in a big move for the market or an individual company are not within your control.

    The one thing you can control to some extent is broker fees.

    That’s why I read through the fine print of the 10 most popular discount stock brokers. Including my top pick platforms, Charles Schwab and E*TRADE, I explored:

    • TD Ameritrade
    • OptionsXpress
    • Lightspeed
    • Interactive Brokers
    • Merrill Edge

    Here’s what I looked for, specifically:

    No Surcharges for Low-Priced Stocks: Many discount brokers tout their “standard” transaction fees in marketing, but neglect to tell you there can be an added cost to low-priced securities. Some brokers charge a percentage on the total trade value and others charge a fee per share. Either way, you’re getting charged way more than you would for a regular blue chip stock like Apple Inc. or Wal-Mart Stores Inc. at standard rates.

    Reasonable Volume Restrictions: If you find a stock you like trading for 1 cent and want to invest $1,000, you’ll be purchasing 100,000 shares. That means any broker that either charges you for large trades or insists you break them up into multiple orders is not conducive to penny stock investing. I insisted platforms allow block orders of more than 1 million shares to be subject to additional fees – meaning you can invest $9,999.99 in that 1-cent investment via a single transaction and not get dinged. That’s plenty for most investors.

    No Costly Add-Ons: Penny stock investing is inherently aggressive, so some brokers demand you upgrade to a premium trading account with higher minimum balances or additional platform fees. Others require you to place orders via telephone to a human broker, which typically can add $25 or more in service charges. If you want to trade penny stocks, you should be able to do so without additional costs and headaches like these.

    Low Minimum Account Balance: Typically, penny stock investors are seeking out these low-priced securities because they don’t have a ton of ready capital they’re willing to risk on them. That means it’s necessary for a good penny stock broker to have a low initial account minimum. But thanks to the very volatile nature of these aggressive investments, it’s not uncommon for penny stock traders to see their initial nest egg shrink in a hurry — so it’s important those low minimum requirements persist beyond sign-up, just in case a trade goes wrong (because at least one or two probably will). I don’t think anyone with less than $1,000 should be investing in individual stocks of any kind, frankly, so I used that as a reasonable minimum threshold.

    Best Overall: Charles Schwab

    Best overall – Charles Schwab

    Charles Schwab’s commitment to a transparent fee structure works strongly in favor of those who want to invest in low-cost securities. There are no hidden fees per share, and no pesky maintenance fees to endure. This is a bit of a rarity when it comes to penny stocks. Many brokers charge you extra to invest in low-priced stocks, or to place large block orders.

    Stock Trading Fee
    Option Trade Fee
    $0.65 per contract
    Customer Satisfaction Score
    4 circles
    4.4 / 5.0
    SimpleScore Charles Schwab 4.4
    Mobile App 5
    Products 5
    Resources 5
    Support Channels 3
    Customer Satisfaction 4

    With Charles Schwab you can confidently trade penny stocks knowing you’ll only be charged $0 to buy and $0 to sell — with none of the additional fees so-called discount brokers place on high-volume penny stock trades. There’s no minimum deposit requirement; however, you should really have around $1,000 to get started trading successfully through any broker.

    • Trading fees: $0 fee for ETFs, options, and stocks, $0.65 per contract
    • Balance Requirements: $0 minimum deposit
    • Volume Restrictions: Up to 1 million shares per transaction without additional cost

    A Trusted Resource for Beginners

    Since Charles Schwab is one of the oldest and most respected brokers out there, your investing adventures don’t have to be limited to penny stocks either.

    After changes to investing regulations in 1975 allowed brokers to be more flexible with fees, Schwab is currently keeping up with broker trends and offering $0 commissions for ETFs, options and stocks.

    If you’re a beginner, Charles Schwab will have everything you need to expand your portfolio.

    That populist approach to investing is very much in the DNA of Charles Schwab today. Want to learn about, say, exchange traded funds? Then check out the tons of articles, videos, and on-demand courses in the Learning Center. There also may be a seminar available at a brick-and-mortar Charles Schwab branch near you, which you can attend free of charge as an account holder. That kind of personal attention simply isn’t there from other online-only platforms. This is just one example of how having a big broker like Schwab on your side can open doors to new trading strategies as you learn and grow as an investor.

    Best for Active Traders: E*TRADE

    That $0 commission structure is tremendous when you consider the competition’s pricing for active traders.

    Stock Trading Fee
    Option Trade Fee
    Customer Satisfaction Score
    4.2 / 5.0
    SimpleScore E*TRADE 4.2
    Mobile App 4
    Products 5
    Resources 4
    Support Channels 4
    Customer Satisfaction 4

    For beginner and veteran investors alike, transparency matters. E*TRADE doesn’t charge commission to its clients, which means that stocks and ETFs are traded for $0.

    E*TRADE Commission Structure

    Your transactionsFeesSubtotal
    First 30 trades$0$0
    Next 470 trades$0$0

    Fees Are Important, But So Is Research

    If all this talk about fees and figures has your eyes glazing over, then I have bad news for you – penny stock investing is particularly hazardous to people who don’t like numbers. That’s because your success in trading them relies solely on your own ability to research them. The vast majority of penny stocks operate under the radar of professional Wall Street analysts, which makes them incredibly hard to predict.

    Consider that Apple Inc. has about 40 investment firms poring over its press releases and its public filings with the Securities and Exchange Commission. That’s not to mention the countless armchair investors sharing their opinions on blogs or social media about the company’s financials, too. And despite all this, there are still investors who have lost money on the stock by failing to anticipate the right time to buy and the right time to sell.

    Penny stocks have almost no media and analyst coverage. That makes them incredibly risky and uncertain.

    What’s worse, it is crucial to note that this lack of coverage doesn’t just lead to bad investments, but can also lead to outright fraud. Take the case of Daniel Ruettiger, the walk-on Notre Dame football player immortalized in the movie, “Rudy.” Ruettiger used his modest fame to start a penny stock sports drink company, and then fraudulently inflated its value to rake in $11 million in ill-gotten profits.

    More recently, in March of 2016 the SEC fined a stock market “expert” after the guy took $330,000 in compensation from a struggling penny stock in exchange for constant touting of the firm on blogs, social media, and other outlets. These kind of “pump and dump” schemes are common among penny stocks, since the investments aren’t widely covered and it’s easy for a false rumor to take hold.

    Remember these examples the next time you get a hot tip and think of just diving in without doing your own research. At a minimum, you should always search the SEC Edgar database for filings from a potential investment. By law, any stock – even penny stocks – has to report its gross sales, net profit, and potential risks to investors. I’d also highly recommend doing a few hours of simple Google research around the company and reading what blogs, press releases, and other investors are saying. You don’t have to agree, and it’s important to take all commentary with a grain of salt, but it’s important to at least know what’s out there.

    Whatever your strategy, don’t let the allure of big profits fool you into just investing on a whim. Otherwise, you could find yourself on the wrong side of one of these scams, with fraudsters making millions, and you losing all of your money.



    The SimpleScore is a proprietary scoring metric we use to objectively compare products and services at The Simple Dollar.

    For every review, our editorial team:

    • Identifies five measurable aspects to compare across each brand
    • Determines the rating criteria for each aspect score
    • Averages the five aspect scores to produce a single SimpleScore

    Here’s a breakdown of the five aspect scores and their rating criteria for our review of the best stock trading platforms and brokerages of 2020.


    Why do some brands have different SimpleScores on different pages?

    To ensure the SimpleScore is as helpful and accurate as possible, we developed unique criteria for every category we compare at The Simple Dollar. Since most brands offer a variety of financial solutions, their products and services will score differently depending on what we’re scoring on a given page.

    However, it’s also possible for brands to have multiple SimpleScores, as we measure each category individually with a separate set of criteria. For example, when we apply our methodology to Chase’s stock trading product, it scores a 3.6 out of 5. On the other hand, when we compare Chase checking accounts, it scores a 4.4 out of 5.

    Questions about our methodology?

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    Mobile app rating

    We took an average of each stock brokerage’s iOS App Store and Google Play ratings and scored brands based on the result.

    Additional products

    Investing is not just about stocks. We rated brands based on their product variety including ETFs, bonds, mutual funds, IRAs and options. The more products means higher the score.


    We rated brands based on how many educational and investing resources are available. This includes Morningstar reports, market trends, how-to guides and more.

    Customer support

    When you run into trouble with your stock investment account, how can you get in touch for support? We award brands with more channels of support with higher scores in this aspect.

    Customer satisfaction

    We leveraged J.D. Power’s 2020 U.S. Self-Directed Investor Satisfaction Study to rate each brand’s customer satisfaction. As always, a higher customer satisfaction rating means a higher SimpleScore.

    Jeff Reeves

    Contributing Writer

    Jeff Reeves is a financial commentator with 20 years of newsroom and stock market experience. His work has appeared in numerous finance publications and broadcast outlets, including The Wall Street Journal network, CNBC,, Fox Business Channel, USA Today. He also did a stint as an editor for the New York Times Co.