Penny Stock Brokers - How Do I Pick The Right Penny Stock Broker For My Trades?

Penny stock brokers must be used by ordinary people who want to buy penny stocks. A penny stock broker is rather like the "middleman" between the penny stock market and the general public. This is the law, to make sure that only licensed professionals are recommending or doing the dealing for penny stocks.

If you want to buy penny stock, you tell the penny stock broker you want a certain amount of shares of a particular company, and it is then the penny stock broker's responsibility to fulfill your order. Now, you might use a "full service" broker or a "discount" broker, which allows you to enter your own trades through an online interactive platform--the advantage being that if you do that, you pay much less in total commissions because the broker does less work--they only execute trades for you, they don't offer you the advice or the research services of the full-service brokerages.

Discount brokers are the ones that are usually recommended when trading in penny stocks. This is because penny stocks trade for a small price and have small market capitalization compared to other stocks. They are typically traded separately from the major stock exchanges. Penny stocks are generallythought of by traders as high risk, highly speculative financial instruments because: they lack liquidity; they trade with large bid-ask spreads; they have small capitalization; and they only have limited disclosure and those following them. Often, penny stocks are traded over the counter (OTC)) via theOTCBB and pink sheets.

Penny stock brokers do not literally trade stocks for mere pennies (although penny stocks may trade for less than $1). In fact, there isn't any generally accepted definition of what a penny stock. Some consider penny stocks to be those which trade for less than $5 a share, while other traders say that they are any stock that is traded somewhere off of the major market exchanges. But there are some large corporations (in terms of market capitalization) that have their shares trade for less than $5 each, while there are also a lot of very small companies that have their stocks trade for $5 or more.

Typically, though, a penny stock broker allows you to trade the stocks of very small companies, and they are highly speculative and illiquid shares. The company will typically be subject to limited listing requirements as well as fewer standards of filing and regulation.

TDAmeritrade, Scottrade, E*Trade, and ING's Sharebuilder are generally considered to be the best penny stock brokers. Which penny stock broker is best for you depends on your comparison and contrasting of certain qualities:
    
* Features and Benefits
* Commissions (read all fine print very carefully)
* Inactivity fees
* Minimum funding required to open an account

Of course, the reason why people trade in penny stocks is to be able to buy a lot of shares for a relatively low price. Also, the price of a penny stock does not need to rise much in order to generate a large profit margin. But remember they are highly speculative and risky. Use one of these recommended penny stock brokers to minimize your risks.