Penny Stock Brokers - What Do The Best Penny Stock Brokers Look Like?

Your choice of the right penny stock broker is critical to your success in penny stock trading. You could have the best investment strategy out there but if your broker isnt able to execute the trades according to your plan, your profits are not going to be even close to what you anticipated.

Types Of Penny Stock Brokers

There are a few distinct points to consider if you were looking around for a broker or just finalizing your decision. The first is whether you want to pick a "full service" broker or a "discount" broker. Whats the difference you ask? The full-service brokers offer more assistance or handholding while trading. This is ideal if you have a very large portfolio and less time to invest. For penny stock trades though, we cant see too many good reasons to use a full-service broker. In order to keep costs low you should consider a discount brokerage. These firms will offer you less research options (sometimes) and will let you place orders on your own. We think your understanding of the process is essential which is why you should go the discount route.

Our Criteria For Choosing Amongst Penny Stock Brokers:

• Costs or Commissions - Since you will be buying and selling penny stocks, the orders will add up quickly. Do you really want to be paying top dollar for every trade while only buying a few shares at a time? Look at how the broker structures the commissions. If its a percentage of the total amount in a trade, then keep in mind that for larger trades you will be paying more. More often than not a fixed cost per trade is ideal. Its easier to keep track of your bottom line when you are paying only $X per trade. Also keep in mind that sometimes commissions are introductory rates or they depend on the number of trades you make on a monthly basis. So, read the fine print carefully.
  
  
• Trade Execution And Reliability - It should come as no surprise to you that penny stocks are very volatile. The prices can fall like a rock or rise like a wave. If you are ever caught in either situation you usually want a broker who will execute the trade for you as quickly as possible so that you can cash in on your profits or cut your losses fast. Most brokers are comparable in speed of execution but its an important factor to keep in mind. Its just as important for penny stock brokers to be built on the best technology possible to keep them up and running. You cant afford to have a technology glitch in the middle of your trade.
  
  
• Research And Tools - Just because you are thinking discount dont think that brokers will definitely shortchange you on the research or trading tools they provide. The number of investors who use discount brokerages is rapidly increasing and so is the sophistication of stock research options as well as trading tools these companies provide. If you want to learn more about a stock you will probably look at the independent research options available. On the other hand if you want to verify whether a certain investment strategy would work, you might want to backtest it using trading tools. This is for more sophisticated investors but you should keep this in mind too.
  
  
• Customer Service And Ease Of Use - A lot of novice investors might look past this. They might use costs as the only criterion when picking a penny stock broker. We believe that small things like the following matter
  
  • the broker has a 1-800 number
  • the website has a good search feature
  • There are demos on the website
  • There is a contact form or some other way of reaching technical support

These things might seem small but when you actually need to reach out to your broker or are looking for something or just need help placing a trade, you will be glad you considered this when choosing your penny stock broker. 

Some popular penny stock brokers are Scottrade, ShareBuilder, TD Ameritrade, Zecco, Etrade and SogoTrade. These are an excellent place to start.