Top penny stocks brokers. Best brokerage companies for trading OTC BB, pink sheets, and stocks priced under $1.

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Trading Penny Stocks on Firstrade and TD Ameritrade

If you are planning to include penny stocks in your portfolio, then it’s even more important to choose your broker carefully. This is because many brokers don’t support penny stocks on their platform, and often times the ones that do charge higher commissions than you would pay for a stock on the major exchanges. This article will go over two of the best brokers for penny stocks – Firstrade and Ameritrade – and offer some general tips for trading these volatile stocks.

Penny Stocks on Firstrade

Between these two brokers, Firstrade is hands down the cheapest one because they offer commission-free trades for penny stocks (and really all stocks) without any surcharges or surprise fees. This is quite unique, because most brokers that offer penny stocks often charge you higher commissions to trade them. Firstrade offers more than 10,000 penny stocks that trade on both the OTC BB and OTC Pink Sheets, and they allow you to easily isolate them by running their stock screener with a stock exchange filter. And placing a penny stock trade on Firstrade is easy – it’s the same as buying any other stock.

BEST Penny Stock Brokers

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Penny Stocks on TD Ameritrade

If Firstrade is the cost-conscious, penny stock investor’s top broker, TD Ameritrade is the top pick for the penny stock trader who wants the best trading tools and is willing to pay a (reasonable) price for it. TD Ameritrade has a straightforward commission schedule for all equities – it’s $0 per trade regardless of the type of stock, share price, or quantity of shares. OTC stocks are $6.95. TD Ameritrade offers more than 4,000 penny stocks on their platform, which you can find by applying the below exchange filter in their stock screener.

Top Penny Stock Broker

TD Ameritrade makes trading penny stocks easy on any of their platforms, including the popular Thinkorswim, and placing a penny stock trade is the same as trading any other type of stock. The broker doesn’t charge any extra fees or surcharges for trading penny stocks, so you’re only paying the flat $0 commission ($6.95 for OTC stocks). TD Ameritrade also lets you short penny stocks if you have a margin account (and assuming they are able to locate shares to borrow for you).

Risks of Trading Penny Stocks

Most penny stock traders/investors are likely attracted to these micro-caps because of the potential for outsized returns that just aren’t nearly as common with stocks trading on the NYSE and NASDAQ. While it’s true that some penny stocks have offered once-in-a-lifetime returns, this has not been without significant risks. Penny stocks are usually tiny companies that are either too young to be generating cash flow yet or less common they could be once established companies that have fallen on hard times and are close to bankruptcy, and have been delisted from the major exchanges as a result.

Another important distinguishing feature of penny stocks is that the OTC exchanges do not have the same stringent financial reporting requirements that companies listed on the NYSE or NASDAQ must comply with. Companies that trade on the major exchanges are required to submit independently audited quarterly financial statements to promote transparency with investors, but companies on the OTC do not face this requirement.

An Example

Penny stocks come in all shapes and sizes and all types of risk levels, which is why it’s important to thoroughly research these companies before investing. While some trade literally for pennies a share and don’t release any financials (since they aren’t required to) some penny stocks are diamonds in the rough so to speak that do more than legally required to inform their shareholders. One example of a quality penny stock that trades on the OTC is Avita Medical (AVMXY), which is currently trading around $6/share.

Avita Medical is a small medical device company (~$500 million market cap) that just started selling its first FDA-approved product earlier this year. The company has a primary listing on the Sydney stock exchange and has an ADR listed on the OTC exchange in the U.S. While investing in young small caps like Avita Medical always carries more risk, this company chooses to release audited financial statements in order to provide shareholders with increased transparency, just like a big board stock is required to do.

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