Penny Stock Trading Platforms to Consider

A penny stock is formally defined as any stock less than $5 per share according to the SEC and other regulatory bodies. In common practice, many investors define a penny stock as stock with a share price of under $1. Investors always hope they’ll pick a stock that climbs rapidly in value, but should understand there are a number of challenges unique to this type of investing.

A financial advisor can help you navigate penny stocks and other investments for your portfolio.

How Penny Trading Works

Penny trading is more tightly regulated than ordinary stock trading. Because investors don’t trade these stocks often prices are both more volatile and less accurate. These stocks are also more difficult to sell once you have them and can be far more difficult to buy if you’ve taken a short position. As a result, this is a market generally occupied by accredited and sophisticated investors.

However, the same volatility that makes this a speculative asset also can make it a highly profitable one. After all, while it takes a lot for Amazon to double in value, a stock selling for $0.25 only needs to climb by a quarter per share to do the same thing. And, ultimately, in the stock market, it’s not the price at which you sell the stock that matters; it’s the percentage of the gain.

If you are in the market for penny stocks, and if you fully understand the risks involved, here are five great sites for making these trades.

1. TradeStation

Pros

TradeStation is a fantastic platform for the kind of data-heavy work that penny stock traders depend on. This service offers an unparalleled amount of technical information that’s specifically useful to volatility-oriented traders like penny stock investors and day traders. This includes access to real-time OTC stock prices, a service that many other platforms don’t offer. Investors should note that these prices can be unreliable, especially when delivered in real-time, but it is still a strong feature.

This all comes on top of a service that already offers terrific stock trading tools to begin with. The customization available through TradeStation allows you to build a trading environment that’s just right for you, and its ability to search through industries and exchanges for both mainstream and OTC stocks makes it very useful.

Finally, TradeStation charges solid prices for OTC trading. With the first 10,000 shares free, followed by just $0.005 per share, this is a good price for a great product. It isn’t the cheapest, but it is certainly competitive.

Cons

TradeStation lags slightly behind its competitors in certain areas. It is not quite as fast as Lightspeed Trading, nor as cheap as Fidelity. Yet these are minor issues at best. If you are an OTC stock trader, this is a terrific product for you.

2. E*TRADE

Pros

E*TRADE is one of the best all-around trading platforms on the web, right up there next to TD Ameritrade. This is particularly true when it comes to new investors. If you’re out there learning the ropes, E*TRADE’s clean design and strong educational resources make it a fantastic choice for you. This is just as true when it comes to penny stocks.

If you’re looking to learn this segment of the market, E*TRADE may be the best platform you can select. This platform is easy to use and navigate, allowing new investors to focus on learning the assets rather than the system. It also comes equipped with a terrific range of educational tools, fundamental analysis outlets, and other resources for investors looking to learn how to trade penny stocks wisely.

Cons

E*TRADE is probably not the best platform for sophisticated traders. With prices starting at $6.95 per trade for OTC stocks, this is one of the more expensive choices out there. At the same time its tools are strong, but also not the very best you can find. You will get a better range of data and trading tools from some of the other platforms on this list.

New investors will find E*TRADE is a great learning environment. Experienced investors may quickly find it limiting.

3. Lightspeed Trading

Pros

Penny stock traders are some of the highest-velocity traders on the market, often second only to the forex investors. This is because both markets share the same tendency to make money off of fractional changes in value. When the movement of a few cents can mean your entire profit margin, it pays to trade quickly (literally).

Lightspeed Trading is a terrific platform for exactly this type of investor. As its name suggests, this product is built with speed in mind. From boasting better connection speeds than its competitors to allowing you to select the routing instructions for any given trade, Lightspeed offers several features specific to very active traders. It has an extremely strong suite of technical indicators, with a particular emphasis on volatility and related data that can help you find and track stocks based on their movement.

Together this platform emphasizes one trading profile: Data-driven investors who trade quickly and trade often.

Cons

This platform delivers very little for any other kind of investor. Lightspeed had little (if any) fundamental analysis, for example, and its interface can be confusing at best. This is a very complicated piece of software that doesn’t try to make life much easier. Unless you’re a sophisticated investor you shouldn’t expect to understand this program.

At the same time, Lightspeed also charges you to trade stocks. Now, even in the era of zero-fee stock trading, this is not unusual for penny stocks. Most platforms apply at least a nominal charge due to the difficulty of trading in this segment of the market. However, Lightspeed’s fees are somewhat higher than its competitors starting at $0.20 per option and $2.00 per trade. This isn’t a problem if you plan to really take advantage of its features, but make sure you’ll get your money’s worth.

4. Fidelity

Pros

As noted above, even in the era of zero-commission stock trading many firms still charge you to trade penny stocks. (While brokerages rarely list their prices for “penny stocks,” you can typically find this information under “OTC” or “Over the Counter” fees.) Fidelity does not. This platform offers legitimately free penny stock trading, absent any costs charged by other market participants. For an asset that often works on such small margins, this can be an enormous benefit.

At the same time, Fidelity also offers a strong trading platform overall with numerous resources for education and research. In particular for penny stock traders, Fidelity does not accept payment for order flow.

Cons

While Fidelity offers a strong trading platform, it isn’t the friendliest format for beginners. It may be challenging to navigate for users who are looking for highly specialized tools and information for OTC trades.

If your primary goal is to make sure that fees don’t eat into your margins, Fidelity might well be the platform for you. However, if you have other needs as an investor, you may want to look elsewhere.

5. Interactive Brokers

Pros

Interactive Broker is a tough one on this list mainly because it is one of the most expensive options you can choose. It charges a $1 minimum per trade, plus per-share prices that start at $0.0029 and climb from there. As these charges grow they can bite into your profits pretty quickly.

So why list it here? There are two reasons. First, Interactive Brokers is a generally outstanding trading platform that also offers penny stock trading. Investors who are looking for a trading solution would do well to consider this product overall.

Second, Interactive Brokers also offers one of the widest ranges of penny stocks to short when compared with other platforms. This is why we have listed it as the best platform for risk-takers. Shorting penny stocks is one of the highest speculation investments you can take on, up there next to futures and minor market currencies.

Cons

Interactive Brokers is a great platform for investors who also want to add some penny stocks to their investment portfolios. However, if you are specifically interested in trading OTC shares, and you aren’t looking to take on the enormous risk of shorting this market, you’ll probably do better with one of the other entries on this list.

What to Look for in a Penny Stock Trading Platform

Not all trading platforms are created equal, especially when it comes to penny stocks. Since these stocks are more volatile and often trade over-the-counter (OTC), choosing the right platform can make a big difference in your experience. Here are some key features to look for:

Low Trading Fees for OTC Stocks: Penny stocks often involve trading large quantities of inexpensive shares, so high fees can quickly eat into your profits. Look for a platform that offers competitive rates for OTC trades, ideally with no sneaky fees.
Access to Real-Time Data and Level 2 Quotes: Because penny stocks move fast, having access to up-to-the-second price data and Level 2 quotes, which show detailed bid and ask prices, can help you make better decisions and spot opportunities.
Ease of Order Execution and Liquidity Tools: Penny stocks can be illiquid, so choose a platform with strong order execution capabilities and tools to help you gauge liquidity before you buy or sell.
Educational Resources for Beginners: If you’re new to penny stock trading, a platform with tutorials, guides, and educational videos can help you understand the basics and avoid common mistakes.
Customer Support and Platform Usability: Given the fast-moving nature of this market, it helps to have a user-friendly interface and reliable customer support in case you run into issues.

Choosing a platform that combines these features will give you a better shot at navigating the penny stock market effectively.

Risks of Trading Penny Stocks

Penny stocks might seem appealing because of their low price and high potential returns, but they also carry significant risks. Before jumping in, it’s crucial to understand what you’re getting into:

High Volatility and Steep Losses: Penny stocks can experience dramatic price swings in short periods. While this can lead to quick gains, it also means you could lose your investment just as fast.
Illiquidity: Many penny stocks trade in low volumes, making it hard to find a buyer when you want to sell. This lack of liquidity can trap your money in an underperforming stock.
Susceptibility to Fraud or Manipulation: The penny stock market is more prone to scams, such as “pump and dump” schemes where bad actors artificially inflate a stock’s price and then sell, leaving others with losses.
Lack of Company Transparency and Financial Information: Unlike larger, established companies, many penny stock issuers aren’t required to disclose much financial information. This lack of transparency makes it harder to evaluate the company’s true value or prospects.

Bottom Line

Finding a good penny stock trader can be difficult. All five options on our list have their own pros and cons, but there are some fundamentals to keep in mind. If you’re looking for a new platform then you should consider the costs and overall platform fit with your style and preferences. Each will get the job done, but each does it slightly differently so it’s important you pick a platform that you’re comfortable with.

Tips on Investing

What role should penny stocks play in your portfolio? The best way to come up with the answer to that for your portfolio is by working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Make sure your investment assets fit your risk profile. SmartAsset’s free, easy-to-use asset allocation calculator will help align your assets with your risk tolerance.