Penny stock investing is exhilarating.
The thought of turning pennies into millions of dollars has crossed the hearts and minds of wishful investors for centuries.
But in reality, it isn’t that easy to accomplish and only a few capable investors have done so consistently throughout their careers.
That is because penny stock investing requires one to have a solid understanding of business fundamentals, while also possessing the emotional fortitude to ignore the crowd and stick to the game plan no matter what obstacles are headed your way.
Fortunately, in recent years, it has become a lot easier to succeed in penny stock investing due to the liberalization of information and a significant reduction in costs when trading penny stocks.
As such, retail investors everywhere have the same opportunities that were once exclusive to pros.
In this article, we break down penny stocks in more detail and explore the best penny stock trading apps available in the market today.
If you have ever hoped of making millions with little risk, then you should check out what these platforms have to offer.
Charles Schwab
Pros:
- First-class customer service
- Simple design and easily navigable
Cons:
- Limited technical trading indicators
- $4.95 commission fee per transaction
Charles Schwab is without a doubt one of the best penny stock trading apps around.
Although the app lacks more advanced trading tools like some of the other penny stock apps we mention, it makes up for it with an intuitive platform and top-notch customer service.
Since not every investor needs more advanced products, this app is perfect for the typical penny stock traders seeking to invest quickly and effectively without any issues.
Furthermore, Charles Schwab differentiates itself from the other penny stock apps by offering customers access to its thousands of physical branches spread throughout the country.
If you ever run into problems with the app or are looking for more guidance on your investment strategy, there is always someone available to help, which is valuable when it comes to managing your money.
In addition to its main product offering, the Charles Schwab mobile app offers customer bonus features like a weekly podcast, market recaps, analyst reports, and more.
These are all valuable features for those hoping to expand their understanding of the markets and investing while they venture into their penny stock trading journey.
Overall, Charles Schwab is a great choice for investors wanting a reliable product and company, without all of the, sometimes unnecessary, features.
Robinhood
Pros:
- Commission-free trading
- Simple design and easily navigable
Cons:
- Poor customer service
- Limited access to penny stocks
Robinhood has certainly gained notoriety over the years for its commission-free trading and gamified platform.
Despite it facing backlash over the Game Stop short squeeze sage, it appears that customers have moved on from the debacle and are back to trading stocks as per usual.
Due to its simple design and daily stock alerts, Robinhood is great for speculative investors wanting to trade actively and often.
Although there are limitations on the kinds of penny stocks they offer, Robinhood still has access to major stock markets which is good for investors wanting to avoid any of the risks inherent in pink sheets and over-the-counter stocks.
One thing to keep in mind if you do open an account with Robinhood is that their customer service has proven to be disappointing in the past.
With multiple issues arising at the corporate level and slow response times from its support team, you may be left wondering if you’ll ever receive help.
However, if you are simply there to invest and trade penny stocks, then it’s commission-free trading more than makes up for it.
Overall, Robinhood’s penny stock app is best for beginner investors with limited funds or for those wanting to trade frequently.
TD Ameritrade
Pros:
- Abundant technical indicators and financial information
- Customizable dashboard
Cons:
- $6.95 commission fee per transaction
- Advanced tools may be overwhelming to beginners
If you are a more experienced investor looking for all of the bells and whistles, then look no further than TD Ameritrade’s mobile app.
Along with its Thinkorswim trading platform, TD offers a great stock trading app for technical analysis and trading penny stocks.
With more advanced features than your traditional trading platform, this truly is a one-stop shop for trading penny stocks and more.
However, where we may offer criticism is that the company’s $6.95 commission fee on penny stocks can be damaging to investors managing smaller portfolios since it eats up a larger portion of their transactions.
Therefore, if your goal is to trade penny stocks, and you aren’t working with large sums of money, it is probably best that you opt for a cheaper alternative.
Overall, this is a fantastic penny stock app for any investor seeking a more advanced product and top-of-the-line trading tools.
E*TRADE
Pros:
- Simple design and easily navigable
- Access to penny stocks trading on all market types (Pink sheet, OTC, etc.)
Cons:
- Limited access to international markets
- $6.95 commission fee per transaction
E*Trade is another great choice for investors requiring dependable customer service and an easily navigable platform.
With a variety of technical indicators and research tools to explore, the platform is an overall improvement from Charles Schwab’s trading app in this regard.
In addition to this, the company offers a great variety of informational tools like stock news, analyst reports, and more, which is valuable for those wanting more info before making a trade.
While E*Trade does allow pink sheet and over-the-counter penny stocks to be traded, you may run into some problems finding international penny stocks due to the platform’s limitations on international markets.
Furthermore, the E*Trade trading platform’s $6.95 commission fee on penny stocks may be
All-in-all, E*Trade is a great choice for investors wanting a simple design, easy navigation, and an alternative to Charles Schwab’s platform.
TradeStation
Pros:
- Abundant technical indicators and financial information
- Commission-free trading
- International Market Access (130+ markets)
Cons:
- Poor Customer Service
TradeStation is another fantastic platform for those penny stock investors wanting a more thorough experience.
However, where it differentiates itself as a platform is its commission fee trading on penny stocks and its access to over 135 global markets.
For these reasons, it is a great choice for those penny stock investors comfortable with exploring untapped markets and underestimated penny stocks.
While its customer service is something poor, often leading to long wait times before problems are addressed, the product itself is solid and usually reliable.
Overall, TradeStation is ideal for more advanced technical traders who are looking to trade penny stocks actively.
Interactive Brokers
Pros:
- Commission-free trading
- IBKR stock bonus
- International market access (150+ markets)
Cons:
- The platform may be overwhelming to beginners
Interactive Brokers is by far our favorite penny stock trading platform to date.
With more features than any other platform out there, it truly is a top-notch product for any investor wanting to seriously invest in penny stocks.
In addition to its main features, the company offers access to over 150 global markets, commission-free trading for penny stocks, and a highly intuitive interface.
Although it may not be the best choice for beginner investors due to the complexity of the platform, it is perfect for those with experience because of its endless technical and fundamental tools.
However, if you are inexperienced, but take the time to understand all of the tools and features, you will likely improve your skills as a penny stock investor because the quality of information is unmatched.
All-in-all, Interactive Brokers is a valuable choice for any serious penny stock trader and we highly recommend it to anyone considering a new penny stock trading platform.
What is a Penny Stock?
Many investors have heard of penny stocks, but they may not know exactly what they are.
Essentially, penny stocks are understood to be any publicly traded company whose stock price is trading below $5 per share.
More specifically, penny stocks are businesses that have a market capitalization value below $300 million.
Also known as micro-cap stocks, penny stocks are often considered risky investments due to their volatile nature and lack of financial information.
But are these assumptions valid?
Let’s dig deeper.
To learn more about penny stocks, check out our penny stocks beginners guide here.
Are Penny Stocks Risky?
Yes, penny stocks are generally dubbed as high-risk investments due to their lack of liquidity and limited financial information.
To elaborate, most penny stocks have only existed for a short period, therefore they tend to be less known, and traded less often than bigger companies like large-cap stocks.
In addition, penny stocks usually have only a few years of financial information available to investors making it difficult to determine the financial health of the company or to predict where it is headed in the future.
For these reasons, penny stocks sometimes experience extreme episodes of volatility whereby the stock price fluctuates violently as investors buy and sell large portions of a company’s stock at once.
As such, most investors prefer to avoid these stocks altogether because of their unpredictable nature and the higher risk of falling to zero.
That being said, for those investors willing to stomach the volatility, there are some wonderful opportunities to make a lot of money with penny stocks.
You just have to know what to look for.
How to Make Money with Penny Stocks
If you are looking to make money with penny stocks, then your best bet is to follow these few simple tips for every investment decision:
1. Do Your Research
Before investing in any penny stock, it is important to thoroughly research the company and its financial performance.
Look for companies with a strong financial track record, a solid business model, and a clear growth strategy.
A common misconception among most investors is that penny stocks are riskier simply because they are smaller businesses.
On the contrary, large-cap companies can be just as risky as penny stocks if they possess a terrible balance sheet and poor business fundamentals.
Regardless of its size, a business will ultimately succeed if it has favorable economic conditions, a durable competitive advantage, and a management team that is transparent and competent.
Therefore, with any individual stock you research, you must focus on businesses that possess these favorable characteristics.
If you do, you will improve your likelihood of success tenfold.
2. Diversify Your Portfolio
Investing in a diverse range of penny stocks can help to mitigate the risks associated with investing in this market.
Consider investing in a variety of companies in different industries, as well as a mix of small and large companies.
Ultimately your goal as an active investor is to find 10 to 20 excellent businesses that you easily understand.
Remember, investing is a lifelong journey and your goal is to create generational wealth for you and your family.
While making significant returns on your investment feels great, so too does the feeling of knowing that your money is protected across a broad range of assets.
3. Be Patient
“The big money is not in the buying or the selling but in the waiting.” – Charlie Munger
Penny stocks can be volatile, so it is important to be patient and not make rash decisions based on short-term market fluctuations.
Despite what many investors may try and tell you, timing the market is nearly impossible, therefore it is better to invest in penny stocks that you are comfortable holding for the long run.
The easiest way to make money in the market, while also saving your sanity, is to only buy businesses that you fully understand.
Although something unexpected may be thrown its way, if you’ve conducted the proper research and are confident that it will overcome these challenges, then who cares what fluctuations happen in the short run?
If anything, you may be able to buy more shares for less when other investors are panicking.
4. Be Aware of the Risks
As with any investment, it is important to be aware of the risks associated with penny stocks.
Since we already covered the general risks associated with penny stocks, the next step to improving your success when investing in them is to understand the specific risks associated with a business.
The better you understand the specific challenges a company faces, the less surprising it will be when these risks happen, and they will!
If you aren’t caught off guard by spontaneous events that may hurt the business, the more rational your decision-making will be during times of uncertainty.
Investing is an emotional game.
The less emotional you are, the more likely you are to find success as an investor.
For more information on how to make money with penny stocks, check out our full article here.
Where to Find Penny Stocks
Before we jump into the best penny stock trading apps available in the market today, we wanted to share with you a few other places where you can find penny stocks to invest in.
When investing in individual stocks, the more businesses that you expose yourself to, the better idea you will have about what makes a good and bad investment.
In this case, using all the investment tools at your disposal will provide you with the clearest picture of how to find success in the stock market.
With that being said, here are a few places where you can find penny stocks:
1. Over-the-counter Markets
The OTC Markets, also known as the “over-the-counter” markets, is a network of electronic trading platforms that allow investors to trade stocks that are not listed on major exchanges.
Many penny stocks trade on the OTC Markets because they do not meet the minimum requirements set by the major stock exchanges.
For this reason, it is important to be aware of the major risks associated with OTC stocks.
These include, but are not limited to a lack of liquidity, lack of financial information, risk of fraud, and higher volatility.
To limit these risks, the largest and most well-respected marketplace for OTC stocks is the OTCQX which includes a wide variety of exchanges including OTCQX Billion+, OTCQX Composite, OTCQX Dividend, and many others.
2. Online Brokers
Many online brokers and trading platforms offer access to penny stocks, often through specialized “penny stock” platforms or services.
These platforms typically allow you to search for specific stocks or browse listings by criteria such as price, market capitalization, or sector.
A few of the best online brokers for trading penny stocks are:
3. Financial Websites
Some financial websites and resources, such as stock market news and analysis websites, offer lists of penny stocks or feature articles and analyses on specific penny stock companies.
These can be a good source of information and insight on penny stocks, but be sure to carefully research any company before investing.
Financial websites are a great way to expose yourself to new investment opportunities and perspectives.
As an investor, it is valuable to embrace different perspectives about a penny stock because it sharpens your thesis and strengthens your understanding.
However, do not rely solely on the opinions of other investors.
Ultimately, you must be in a position to make a sound decision when a stock you own falls 50% out of nowhere.
Therefore, financial websites should be treated mostly as a supplement to your research, not the deciding factor when choosing to act on a penny stock.
For those investors wanting to increase their exposure, check out:
How do Penny Stock Trading Apps make Money?
Another consideration, and possibly the most important one on investors’ minds is, “how much am I going to pay to use this penny stock trading app?”
Well, to answer this question, here are a few different ways that penny stock trading apps generate money.
1. Trading Fees
One of the most common ways that penny stock apps make money is through trading fees.
Whenever a user buys or sells a penny stock through the app, the penny stock app may charge a small fee for the transaction.
This can add up to a significant amount of revenue, especially if the app has a large user base.
Trading fees are an important consideration for stock traders because they can add up quickly, thus limiting your returns, especially for those who wish to trade frequently.
Transaction fees usually range anywhere from $0 to $10 depending on the platform and the type of penny stocks you are trading.
2. Subscriptions
Some apps offer additional features and trading tools for a monthly or annual subscription fee.
These features may include real-time stock quotes, market news and analysis, and alerts for important events or changes in the market.
In addition, it may provide penny stock traders with more advanced investment tools that they can then use to more accurately determine how a penny stock will perform.
If you are unfamiliar with a penny stock trading app, it is recommended that you try out their basic version first, and then upgrade if you believe the additional features add value to your trading experience.
3. Advertising
Penny stock apps can also make money through advertising.
The app may display ads from third-party companies, and the penny stock app developer can earn revenue whenever a user clicks on one of these ads.
This can be an effective way to monetize the app without directly charging the user and is a commonly used strategy on most social platforms.
4. Partnerships
In addition to these typical revenue streams, penny stock apps may also make money by partnering with brokerage firms or other financial institutions.
The app may receive a commission whenever a user opens a new account with one of these partners, or whenever a user makes a trade through the partner’s platform.
If trading apps find more ways like this to avoid pushing costs onto customers, then this is extremely advantageous because it means that more investors will be attracted to its low-cost fee structure.
Our Methodology
Edge Investments is dedicated to providing a thorough analysis of all the platforms we discussed in this article.
As we invest in individual stocks ourselves, we prioritized the importance of financial data, trading tools, and accessibility to foreign stocks, OTC stocks, and major stock exchanges when making our decisions.
In addition to our fundamental criteria, we also emphasized the importance of a low-cost provider given that we are retail investors and want to maximize our returns when investing.
While we do offer our honest opinion on these penny stock trading platforms, it is recommended to all investors that they conduct their own research before making a decision.
Overall, our choice is merely a reflection of our investment strategy, thus the options presented may appeal differently to you.
If you want more information on each of these platforms, we recommend you speak directly with a representative from the company.
In doing so, you will receive the most accurate assessment of all these products and services they offer.
We wish you the best in your investment journey and hope that you find a penny stock trading platform that is right for you.