4 Best Brokers for Penny Stock Trading of February 2023
Penny stocks are low-priced securities that trade for less than $5 a share. Not all brokers offer them, and those that do may charge higher fees.
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Penny stocks are risky, low-cost investments, though they don’t actually cost a penny. They are shares of small companies that trade outside of major stock exchanges.
Some brokers add a surcharge to stocks that are valued at less than a certain dollar amount, like penny stocks. Many won't extend their free commission offers to unlisted stocks. The definition of penny stocks will also vary by broker. Some consider anything trading under $5 to be a penny stock, while others put the cutoff at $2 or $1.
For the purposes of this roundup, we limited our selection only to brokerages that give traders full access to over-the-counter (OTC) stocks on the OTC Bulletin Board. (For more on penny stock trading, see our article on investing in penny stocks.)
Penny stocks may seem like a steal when stacked against companies that trade for $500 or more. This is where the backstory is important: These stocks are cheap for a reason. Because they are issued by small, yet-to-be-established companies, penny stock values can be turbulent. They are often hard to research and accurately value, and they trade infrequently, which means they can be tough to sell. (Here are other ways to find cheap stocks beyond penny stocks.)
Because of less stringent financial disclosure requirements, penny stocks are more susceptible to “pump and dump” schemes, where traders talk up the value of a stock only to “dump” it at artificially inflated prices. (In an effort to discourage this practice, the U.S. Securities and Exchange Commission issued new rules in September 2020 to prevent brokers from quoting OTC stocks unless companies issuing shares release up-to-date financial information.)
Choosing a penny stock broker
In case the above didn’t make this clear: There are significant risks that come with trading penny stocks, unless you are a sophisticated investor and you understand this market. You'll also want to be aware of the following when selecting an online broker to trade penny stocks:
Volume restrictions: Besides trade surcharges, there may be volume restrictions. Some, such as Fidelity or Firstrade, offer unlimited shares without additional fees, but a few charge more for large orders. For example, TD Ameritrade's free commission offering doesn't apply to OTC stocks. Some brokers also limit the number of penny stock shares you can trade in one order or in one day, slowing your ability to trade and forcing you to pay another commission for a second order.
Trading restrictions: Watch out for firms that require you to trade penny stocks by placing a phone order or that impose limits on the types of trades you can execute. Ideally, your penny stock broker will allow you to trade penny stocks with the same online platform used for other stock trades.
Below are NerdWallet’s picks for the top brokerages for penny stock traders. You'll notice that many of these brokers also appear on our list of the top online brokers for stock trading; they're all well-rounded brokers that also offer a uniquely strong suite of features for penny stock trading.
Penny stocks are risky, low-cost investments, though they don’t actually cost a penny. They are shares of small companies that trade outside of major stock exchanges.
Some brokers add a surcharge to stocks that are valued at less than a certain dollar amount, like penny stocks. Many won't extend their free commission offers to unlisted stocks. The definition of penny stocks will also vary by broker. Some consider anything trading under $5 to be a penny stock, while others put the cutoff at $2 or $1.
For the purposes of this roundup, we limited our selection only to brokerages that give traders full access to over-the-counter (OTC) stocks on the OTC Bulletin Board. (For more on penny stock trading, see our article on investing in penny stocks.)
Penny stocks may seem like a steal when stacked against companies that trade for $500 or more. This is where the backstory is important: These stocks are cheap for a reason. Because they are issued by small, yet-to-be-established companies, penny stock values can be turbulent. They are often hard to research and accurately value, and they trade infrequently, which means they can be tough to sell. (Here are other ways to find cheap stocks beyond penny stocks.)
Because of less stringent financial disclosure requirements, penny stocks are more susceptible to “pump and dump” schemes, where traders talk up the value of a stock only to “dump” it at artificially inflated prices. (In an effort to discourage this practice, the U.S. Securities and Exchange Commission issued new rules in September 2020 to prevent brokers from quoting OTC stocks unless companies issuing shares release up-to-date financial information.)
Choosing a penny stock broker
In case the above didn’t make this clear: There are significant risks that come with trading penny stocks, unless you are a sophisticated investor and you understand this market. You'll also want to be aware of the following when selecting an online broker to trade penny stocks:
Volume restrictions: Besides trade surcharges, there may be volume restrictions. Some, such as Fidelity or Firstrade, offer unlimited shares without additional fees, but a few charge more for large orders. For example, TD Ameritrade's free commission offering doesn't apply to OTC stocks. Some brokers also limit the number of penny stock shares you can trade in one order or in one day, slowing your ability to trade and forcing you to pay another commission for a second order.
Trading restrictions: Watch out for firms that require you to trade penny stocks by placing a phone order or that impose limits on the types of trades you can execute. Ideally, your penny stock broker will allow you to trade penny stocks with the same online platform used for other stock trades.
Below are NerdWallet’s picks for the top brokerages for penny stock traders. You'll notice that many of these brokers also appear on our list of the top online brokers for stock trading; they're all well-rounded brokers that also offer a uniquely strong suite of features for penny stock trading.
Best Brokers for Penny Stock Trading
| Broker | NerdWallet rating | Fees | Account minimum | Promotion | Learn more |
|---|---|---|---|---|---|
 Fidelity Learn more on Fidelity's website | $0 per trade for online U.S. stocks and ETFs | $0 | Get $100 when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply. | Learn more on Fidelity's website | |
 Interactive Brokers IBKR Pro Learn more on Interactive Brokers' website | $0.005 per share; as low as $0.0005 with volume discounts | $0 | Exclusive! US resident opens a new IBKR Pro individual or joint account receives 0.25% rate reduction on margin loans. Tiers apply. | Learn more on Interactive Brokers' website | |
 TradeStation Learn more on TradeStation's website | $0 per trade | $500 | Qualify for up to $5,000 when you open and fund a new TradeStation account. Offer Code: NERDAFJO. | Learn more on TradeStation's website | |
 Firstrade | $0 per trade | $0 | Up to $200 in Transfer Fee Rebates | Read review |
$0
per trade for online U.S. stocks and ETFs
$0
Get $100
when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply.
Pros
Commission-free stock, ETF and options trades.
Large selection of research providers.
Strong customer service.
Expense-ratio-free index funds.
Highly rated mobile app.
Cons
Relatively high broker-assisted trade fee.
Why We Like It
Fidelity offers $0 trading commissions, a selection of more than 3,300 no-transaction-fee mutual funds and top-notch research tools and trading platform. Its zero-fee index funds and strong customer service reputation are just icing on the cake.
$0.005
per share; as low as $0.0005 with volume discounts
$0
Exclusive!
US resident opens a new IBKR Pro individual or joint account receives 0.25% rate reduction on margin loans. Tiers apply.
Pros
Per-share pricing.
Volume discounts.
Large investment selection.
Extensive tools for active traders.
Powerful trading platform.
NerdWallet users who sign up for IBKR Pro get a 0.25% discount on the first $100,000 of a margin loan.
Cons
Complex pricing on some investments.
Website is difficult to navigate.
Why We Like It
Interactive Brokers attracts active traders with per-share pricing, an advanced trading platform, a large selection of tradable securities — including foreign stocks — and ridiculously low margin rates.
$0
per trade
$500
Qualify for up to $5,000
when you open and fund a new TradeStation account. Offer Code: NERDAFJO.
Pros
High-quality trading platforms.
Comprehensive research.
Commission-free stock, ETF and options trades.
Advanced tools.
Active trader community.
Cons
No transaction-fee-free mutual funds.
Plans and pricing can be confusing.
Why We Like It
TradeStation is a strong choice for active stock, options and futures investors who rely on the broker’s high-octane trading platform, reams of research and sophisticated analytical tools. Trades of up to 10,000 shares are commission-free.
Want to compare more options? Here are our other top picks:
If you’re still on the fence about penny stocks, learn more about some of your other investment options:
Last updated on February 1, 2023
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Methodology
NerdWallet’s comprehensive review process evaluates and ranks the largest U.S. brokers by assets under management, along with emerging industry players. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs. We adhere to strict guidelines for editorial integrity.
We collect data directly from providers through detailed questionnaires, and conduct first-hand testing and observation through provider demonstrations. The questionnaire answers, combined with demonstrations, interviews of personnel at the providers and our specialists’ hands-on research, fuel our proprietary assessment process that scores each provider’s performance across more than 20 factors. The final output produces star ratings from poor (one star) to excellent (five stars).
For more details about the categories considered when rating brokers and our process, read our full methodology.
To recap our selections...
