Buy Penny Stocks Online Without Broker
The StockBrokers.com best online brokers 2023 review, our 13th annual, took three months to complete and produced over 40,000 words of research. Here's how we tested. Our editorial content is independent and unbiased; here's how we make money.
buy penny stocks online without broker
When using TradeStation for trading OTC penny stocks, the cost under the TS Select and TS Go pricing plans is $0 per trade up to 10,000 shares ($0.005 per share thereafter). TradeStation ranked among Best in Class in our Commissions and Fees and Investment Options categories for 2023. Read full review
Despite charging $6.95 for penny stock trades (regular stock trades are $0), TD Ameritrade offers a comprehensive selection of trading tools through the thinkorswim trading platform. While not our top pick for trading penny stocks, TD Ameritrade took our annual award for best trader app and placed second overall among top brokers. Read full review
To dive deeper, read our full reviews.What are penny stocks?Definitions of penny stocks vary. According to the U.S. Securities and Exchange Commission, or SEC, "penny stock" generally refers to a security issued by a very small company (i.e., micro-cap) that trades at less than $5 per share. The most common penny stocks are companies that trade for pennies per share (less than $1). We think of penny stocks as microcap companies with prices under $5 that only trade over the counter.
As an example of the risks involved, penny stocks are often targeted for so-called pump and dump schemes. Promoters of such schemes will lure in investors with the goal of "pumping" up the share price, before dumping their own shares at the expense of the investors, often causing substantial losses.
Most retail investors have a better chance of making money with higher-quality stocks that have a larger capitalization than penny stocks. For example, buying and holding a low-cost index fund over the long term is a safer investment than putting the same amount in a handful of penny stocks over a five- or 10-year period. Generally, investing in penny stocks is best avoided unless you have experience with angel investing and researching startups.
Yes, penny stocks are hard to trade, as they are volatile and illiquid, which can have a negative impact on the bid-ask spreads and your ability to get into and out of your positions. Penny stocks are also hard to research, which further compounds the difficulties of making money trading them.
The cost of trading penny stocks depends on the online broker you use. If you use a broker that offers flat-fee trades instead of per-share rates, trading penny stocks is not expensive. We also recommend avoiding brokers that charge a monthly platform fee, data fees, or monthly minimums, as those costs quickly add up.
If you want to know where to buy penny stocks or just want to do some research, you can use an online stockbroker; most offer penny stock trading. The best penny stock brokers in our analysis include the following:
For additional tools to find penny stocks to trade, you can start with a penny stock screener or market mover list. For example, Yahoo Finance's Trending Tickers and Small Cap Gainers pages both list companies that have jumped in price for the day. Ideal for day trading, the best time to trade momentum stocks is after the market opens at 9:30 a.m. Eastern.
When trading penny stocks, beginners often think they are getting "more for their money" because they can buy more shares in total. This is a myth. Stocks that trade for pennies are far more risky because they trade OTC and do not meet the strict financial requirements to be listed on a major stock exchange like the NASDAQ or NYSE.
Robinhood does not support trading OTC stocks. The only penny stocks supported by Robinhood are stocks that trade on either the NASDAQ or NYSE. If a company listed on the NASDAQ or NYSE trades below $1 for a certain period of time (or fails to meet other minimum financial metrics), it can be delisted and forced to trade OTC. As a result, OTC stocks are risky.
For the StockBrokers.com 13th Annual Review published in January 2023, a total of 3,332 data points were collected over three months and used to score 17 top brokers. This makes StockBrokers.com home to the largest independent database on the web covering the online broker industry.
Our research team meticulously collects data on features with particular importance to penny stock traders, such as trading costs, availability of flat-fee trades, ease of platform and app use, and resources for researching a stock. In total, we evaluate nearly 200 variables for each broker.
Advertiser Disclosure: StockBrokers.com helps investors across the globe by spending over 1,000 hours each year testing and researching online brokers. How do we make money? Our partners compensate us through paid advertising. While partners may pay to provide offers or be featured, e.g. exclusive offers, they cannot pay to alter our recommendations, advice, ratings, or any other content throughout the site. Furthermore, our content and research teams do not participate in any advertising planning nor are they permitted access to advertising campaign data. Here's how we make money.
The availability of investment options is also essential. Some penny stock apps limit your investing to non-OTC stocks, or they may charge a commission for OTC trades. You should also have access to a wide range of other investments, such as stocks, bonds, and ETFs.
Not long ago, most brokers charged commissions or a flat rate for buying and selling penny stocks. Today, you should be able to trade penny stocks at no cost with no account minimums. You just have to look for possible hidden fees or limitations, such as a cap on the number of shares you can trade for free. Plus, if you ever have to use a live broker to execute a trade, you could pay a fee.
Of course, you can make money, but you can lose your money just as easily. Penny stocks, especially those selling for less than five dollars, are considered high risk because the companies are either not yet financially sound or have yet to find a market for their product. Plus, penny stocks are not heavily traded, which could be a liquidity risk if you had to sell them quickly.
Who wouldn't want to have bought in at ground-floor prices of companies before they became big and successful? That's the hope of many penny stock investors. If you've never heard of penny stocks or are considering investing in them, here are some of the key things to think about.
In practice, you might come across several definitions of a penny stock. Some investors consider penny stocks to be those that trade for less than $1 and/or over the counter on the OTC Bulletin Board. You may see penny stocks referred to as micro-cap stocks at Fidelity (or as "small companies" elsewhere).
Investors who like penny stocks perceive them as having several attractive features: the low stock price, which allows investors to buy a relatively large number of shares, and the potential for quick gains." Some penny stock investors may buy tens of thousands of shares for a relatively low amount of money, hoping that the price will rise sharply over a short period of time. But there is much more to think about when it comes to penny stocks.
It's important to know the risks of penny stocks because of the greater potential for loss associated with these types of investments, compared with established companies that trade on larger exchanges.
Less stringent disclosure requirements can make penny stocks particularly susceptible to illegal "pump-and-dump" schemes where unscrupulous investors buy the stock, actively promote only its virtues (e.g., "pump it up"), and then, if the stock price appreciates, sell it (e.g., "dump") at an artificially inflated price. Because they are often small in size, penny stock companies do not receive the same level of media and analyst coverage as larger, public companies, so it can be difficult for investors to determine the validity of claims made by pump-and-dump schemers. Unfortunately, those who bought the stock at the high end could be left high and dry.
Additionally, penny stocks can have low liquidity. Many penny stocks are thinly traded. When buying or selling a stock that has low trading volume, investors may not be able to do so at their desired price or time, and that can be costly. Low liquidity is a contributing factor to potentially high bid-ask spreads for penny stocks. This means that, relative to most stocks traded on the Nasdaq or the NYSE, the cost of trading these stocks is typically higher.
Of course, there is the potential to make money investing in penny stocks. However, penny stock investors are taking on a dramatic increase in potential price volatility and risk; there is an even stronger chance that investing in penny stocks could result in losing part or all of your investment. The bottom line is this: Investing in penny stocks entails significantly more risk compared with investing in established companies.
FINRA sets a requirement of $25,000 in your brokerage account to begin, but there are other online brokerages that allow you to trade with a lower minimum. Check with your penny stocks app or broker to learn more.
Buying stocks may help you get started on the path to building wealth. And just like hiring professional movers can help make relocating less stressful, purchasing stocks through a broker can make the process of diversifying your portfolio easier.
It is possible to buy stocks without a broker. In fact, there are three alternatives to using a full-service broker: opening an online brokerage account, investing in a dividend reinvestment plan, and investing in a direct stock purchase plan. This article will cover the pros, cons, and how-tos of each of these ways to buy stocks without broker involvement.
Direct Stock Purchase Plans (DSPPs) allow investors to purchase shares of company stock directly from the company itself. Specifically, trades are completed through a transfer agent.That means you could buy stocks without a broker, full-service or online, to complete the transaction. 041b061a72