Online Brokers

We have researched all of the best stock brokers in the “deep discount” category, that are worth considering for a penny stock trader. Use the table for a quick overview of commissions and fees. Details for each of the brokers are listed below; use the links or scroll down to find the best stock broker that fits your personal needs.

GIA special feature on Penny Stock Brokers

IMPORTANT! – Before you begin choosing a Penny Stock Broker read this!

When looking for a Penny Stock Broker there are a few critical points to look for. The majority of brokers have fees that make penny stock trading more expensive than their big, colorful price tags lead you to believe. The truth is that a lot of brokers don’t want to deal with small accounts trading penny stocks as they make the most money from large and active accounts.

To deter penny stock trading, brokers may have fees that affect the trade of low priced stocks, usually less than a dollar. Another typical method is to have a “large order surcharge” that kicks in with trades of more than 1,000 or 100,000 shares. With penny stocks, most notably sub-penny stocks, a small $500 position could be over 100,000 shares. These additional fees are usually noted with an asterisk in small print at the bottom of the page. We have made note of these fees with the brokers listed on this page, just look at the “Penny Stock Fees” column on the chart and read the notes.

As you will see, the only brokers that have none of these fees are ChoiceTrade®, Zecco, Fidelity® and TD Ameritrade®.

The decision between brokers can be difficult. However, you can – like we do – use two brokers. This makes thing more complicated, but can give you a combination of features and price that fits your needs best. It can also help if one broker restricts activity on a certain stock, as the other may not. Having two separate accounts will let you make more daytrades without being flagged as a pattern daytrader, and you’ll likely have cash available for buying stocks more often than should you have a single broker. The other option is to use a low cost penny stock broker such as Choicetrade or Zecco, and use the money you save on commissions to pay for a subscription to a powerful Level 2 Quote service. This is likely your best bet because none of these brokers offer Level 2 quotes on PinkSheet stocks. In addition, a good market data platform will offer better tools than any broker has.

With that said, please check out all the details!

- Stock Broker Comparison -

Broker	Commissions	Inactivity Fees	Min. Funding	Penny Stock Fees - NEW!
ChoiceTrade	$5 Flat!	None	$2000**	None!
Zecco	$4.50 or FREE!**	None	None***	None!
Fidelity	$7.95 Flat	None	$2500	None!
Schwab	$8.95	None	$1000	Max order size 999,999
TDAmeritrade	$9.99 Flat	None	$2000	None!
SogoTrade	$3+***	None	$500	Low Fee – <$1, ½%***
ShareBuilder	$9.95+*	None	None***	Large Order – 1,000+ $0.025*
Scottrade	$7+*	None	$500	Low Fee – <$1, ½%+*

* for stocks trading under $1/share, total commission is $7 + ½% of trade principle.
** to receive $50 cash signup bonus and 4 months of free ChoiceStreamer Basic service.
*** for stocks under $1/share, total commission is ½% of trade principle, minimum $3.
* $4 or less for automatic investments, or $9.95 for real-time trades.
Large order surcharge: In addition to the base commission, a large order surcharge of $0.025 for each additional share over 1,000 shares will be incurred. The total commission (base commission + surcharge) is subject to a maximum of 2.5 percent of the principal, but no less than the base commission. (does not apply to Automatic Investments)
** up to 10 free trades per month with a $25,000 minimum balance, or by making 25 trades a month. Regular trade commission only $4.50!
*** while these brokers have a zero minimum funding level, please remember that we recommend trading with at least $500 per stock.

ChoiceTrade® is a new broker to our penny stock broker page, and honestly we don’t know how we missed it for so long. ChoiceTrade is a great option for penny traders as it offers $5 flat trades. That means unlimited shares, no penny stock surcharge or fees, and no minimum per trade! This is a very competitive offer, especially considering ChoiceTrade has received the Barron’s 4-star award for five years running. They have earned this through their great pricing and customer service. After trying ChoiceTrade we are eager to award it our “Best Penny Stock Broker” designation.

Choice Trade Contact – Phone (877) 731-9114 | Web: www.choicetrade.com

Zecco® is an online broker that is defying all others by offering FREE… yes, you read it correctly, free stock trades. They are able to do this by making their profits via interest on your money, as well as using ads on their site. Other brokers do the same, but still charge fees for each trade. Zecco offers up to 10 trades a month, completely free. The catch is that you have to have a $25,000 balance, or make 25 trades a month… Now, we know most of you are saying to yourself, “well that’s not me.. oh well.” But keep reading! The normal commission is only $4.50 a trade! They have NO minimum funding level, and a FOREX trading solution. While they are improving, we still find ChoiceTrade and TDAmeritrade to have superior customer service.

Zecco’s contact info – Phone: 1-909-657-6655 | Web: www.zecco.com

Fidelity® is a well known name in the investment world. Until recently, however, they were not an economical choice as an online stock broker. Now they’re offering flat $7.95 trades. That’s $7.95, unlimited shares, no matter what price the stock is. Even better, relatively active traders (36+ trades/year on average) qualify for the “Active Trader Pro“. This is a “Windows-based trading platform offers faster trading capability, streaming market data, and fully customizable layouts. Get conditional orders, directed trading, Dow Jones News, tech filters, and trailing stops.” While this won’t give you Level 2 quotes on PinkSheets, it is a definite improvement over the basics that other brokers offer. With Fidelity you can also trade on the go with their iPhone/iPod Touch, or Blackberry apps, or on Fidelity.mobi on any web-enabled phone. Word on the street is that they do not restrict buying on specific penny stocks often. Take that with a grain of salt, but with this combination of a good commission, features, and renowned customer service, Fidelity has become an attractive option as a penny stock broker.

Fidelity’s contact info – Phone: 1-800-343-3548 | Web: www.Fidelity.com

Schwab® has a very similar story to Fidelity in our opinion. Once more of an “investment” oriented company, their commissions and fees for online trading were not competitive with the other options out there. Now they have dropped their online trade commission to just $8.95. The only limitation that will affect penny stock traders is that orders are capped at a maximum of 999,999 shares. Compared to other brokers, this is not as restrictive toward penny stock trading, but it still presents an issue. If you want to trade sub-penny stocks, particularly on the low end toward trip-zeros, this order maximum is going to get in your way. For a .0010 stock, a $1000 trade is a million shares… that’s one share over the limit. Whether this is going to affect your personal trading is up for you to decide, for many it won’t be a big deal. Schwab offers both an online streaming quote option, and a software based platform called StreetSmart Pro. With it you can get quotes, charts, news, screeners, alerts, and manage your trades with a few clicks. As of late, we have not heard much grumbling about penny stock restrictions with Schwab. If it were not for the share limit on orders, this would be one of our Gold Level penny stock brokers. If that limit doesn’t affect you, than we suggest giving Schwab a serious look.

Schwab’s contact info – Phone: 1-866-855-9102 | Web: www.Schwab.com

TDAmeritrade® is one of the best known discount online brokers. Formerly Ameritrade and TD Waterhouse, the companies have now merged. Since the merge, things have gotten better for traders. They now charge a flat $9.99 for all market and limit orders no matter the order size, or stock price – including OTCBB/Pinksheet penny stocks. There are also NO Inactivity or Maintenance Fees no matter what your balance and trading activity level are. Generally there is a $2000 minimum funding level to open an account. Promotional offers may lower this, however.

UPDATE 6/10/10 – We are impressed by TDAmeritrade’s service and features, but recently they seem to be putting more buy restrictions, or phone-in-order restrictions on certain penny stocks. While we cannot quantitatively confirm that there is an actual increase in restrictions, there has been a noticeable increase from our perspective. This is obviously not a desirable aspect for penny stock brokers… With new competition from Fidelity and Schwab offering lower commissions and reportedly fewer restrictions, we have moved TDAmeritrade down to our Silver Level.

TDAmeritrade’s contact info – Phone: 1-888-871-9007 | Web: www.TDAmeritrade.com

SogoTrade® charges $3 for all market and limit orders, unlimited shares, including OTCBB/Pinksheet penny stocks. For stocks traded below $1.00, however, the online commission is ½% of the principal value subject to a $3.00 minimum. This is essentially the same fee as Scottrade, but it is the total commission instead of being on top of $7. So for traders playing with smaller amounts of money, or looking to trade small caps of $1+, SogoTrade is a good option. A $1000 trade of a sub dollar stock would result in a $10 commission. SogoTrade has a low $500 minimum funding level, and no maintenance or inactivity fees. Again, ChoiceTrade and Zecco are still a better choice overall when it comes to the commissions on low priced penny stocks. See more details through the link below.

Fees and Commissions

SogoTrade’s contact info – Phone: 1-888-818-7646 | Web: www.SogoTrade.com

ShareBuilder® is a relatively new, and very unique online discount broker. Opening in 1999, ShareBuilder’s CEO Jeff Seely made it his goal to let everyone participate in a market dominated by large brokerages. The ShareBuilder philosophy is based on three concepts: Discipline, Diversification, and Dollar Cost Averaging. ShareBuilder has merged with ING, and since has offered $9.95 real-time trades. What makes their service unique, however, is the Automatic Investment Plan. You can schedule dollar amount trades for Tuesday of every week and pay a commission of $4 or less. This is a nice feature for making longer term investments, allowing you to build your portfolio slowly and affordably.

The problem with Sharebuilder, when it comes to penny stocks, is that in addition to the base commission, a large order surcharge of $0.025 for each additional share over 1,000 shares will be incurred. The total commission (base commission + surcharge) is subject to a maximum of 2.5 percent of the principal, but no less than the base commission. This doesn’t apply to automated investments, but you probably wouldn’t be using the automated investment system to buy penny stocks either! The additional fees for trading low priced stocks are too outlandish for us to recommend Sharebuilder as a penny stock broker.

Fees and Commissions

ShareBuilder’s contact info – Phone: 1-800-747-2537 | Web: www.ShareBuilder.com

Scottrade® is another inexpensive online broker. They charge $7 for both market and limit orders. There are no quarterly or annual fees, but there is a $500 minimum funding to open an account. The big issue with trading penny stocks with Scottrade is an additional fee for stocks under $1. In addition to the $7 commission, Scottrade charges an additional fee of 0.5% of the total stock value purchased. So if you spend $1000 on a stock, an additional $5 will be added to the $7 commission. For new investors trading small amounts, this won’t be much of an issue. For larger trades, however, ChoiceTrade, Zecco, Fidelity, and TDAmeritrade are better options. Scottrade is also notorious in the penny stock community for restricting buy orders for specific penny stocks, or requiring the order to be called in. This issue, combined with the extra “Penny Stock Fees” make Scottrade a poor option as a penny stock broker.