Mar 05, 2022
When it came to finding the top brokers for trading penny stocks, we looked at 15 different brokers and evaluated their pricing and trading interfaces. We have chosen TD Ameritrade as our full selection for 2022 because of its flat-rate pricing, excellent trading tools, and thorough research.
"Penny stock" often refers to a security issued by a small firm (i.e., micro-cap) that trades for less than $5 per share, according to the US Securities and Exchange Commission. Companies that sell for less than $1 per share are known as penny stocks.
Based on 29 different criteria, these are the top brokers for trading penny stocks.
For penny stock trading in 2022, for a comparison of the top five trading platforms we looked at Ally Invest, E*TRADE, and Webull in addition to our top five picks, J.P. Morgan Self-Directed Investment, Merrill Edge and SoFi Invest.
If you're going to invest in penny stocks, you should do so with caution. When buying penny stocks, here are five things to keep in mind:
No. You can trade penny stocks or any other publicly traded asset with a regulated broker. Penny stocks are more vulnerable than larger-cap firms to insider trading and market manipulation since they are sold using non-public (also known as "insider") information.
Penny stocks are a common target for so-called pump and dump scams, illustrating the dangers involved. With the promise of "pushing" up the share price, the promoters of such schemes will entice investors with the promise of large losses before dumping their shares at the investors' expense.
A federal offence punishable by up to 20 years in prison and fines of up to $25 million for corporations is buying or selling stocks based on insider information.
It's true, but penny stock investments are risky. Make sure to thoroughly investigate the firm whose stock you're interested in, and be aware of exaggerated claims of returns—which may signify a scam—to limit your risks.
It's also critical to work with a trustworthy stockbroker, which you can learn more about in our 2022 guide to the finest stockbrokers. A better-quality stock with a bigger market capitalization will generally provide a better long-term return for retail investors than a penny stock.
For example, when it comes to long-term investments, a low-cost index fund is better than a few penny stocks over a five- or 10-year period. Unless you have a lot of experience with angel investing and studying firms, it's advisable to avoid penny stock investments.
There are several reasons why penny stocks can be difficult to trade, including their high volatility and lack of liquidity, which can impact the bid-ask spreads. To compound the difficulty of making money trading penny stocks, it is common for them to be tough to investigate.
No. According to the numbers, the vast majority of people who trade penny stocks lose money. Because most success stories are shared on social media, it isn't easy to verify whether or not they happened.
To entice novice traders into paying for expensive monthly memberships or courses, penny stock scammers would offer assured or low-risk earnings. To avoid scams, newcomers should carefully review typical subscription offerings, such as chat rooms, newsletters, and live streaming.
An online stock broker is a good place to start if you want to acquire penny stocks or conduct some research. The following are the top brokers in our evaluation:
You might begin by using a penny stock screener or a market-moving list to identify penny stocks to trade.