Trading penny stocks can teach you a lot about how the stock market works, while still allowing you to trade within a budget.
As their name implies, penny stocks are stocks traded at very low cost.
They are not always priced at pennies. Rather, the definition of penny stocks is any stock worth less than £5.
But while it is easy enough to spend money on these cheap stocks, it is much more of a challenge to earn money off of them. Doing so requires the right broker, the right tools, and the right information.
We've researched and tested the very best penny stock platforms.
Table of Contents:
- TOP 10 Best Penny Stock Brokers in the UK
- 1. XTB Online Trading
- 2. Interactive Brokers
- 3. Tradier
- 4. Webull
- 5. Robinhood
- 6. TD Ameritrade
- 7. Charles Schwab
- 8. TradeStation
- 9. Firstrade
- 10. Fidelity
- How Penny Stocks Work
- What Tools do You Need to Trade Penny Stocks
- Why Trade Penny Stocks
- Why are Volatile Stocks Profitable
- Conclusion
TOP Best Penny Stock Brokers
1. XTB Online Trading – Best for Tools
In the world of penny stocks, it’s all a learning game. Your goal is likely to make some money, but you need speed, resources, and the proper tools to do it, right? This is something XTB is familiar with, and they know how to provide the most accessible resources for their clients. It’s quite clear in their design.
XTB built their platform based on the oddities, and penny shares are one of those. They are widely known for their forays into CFDs and forex, but they support a wide variety of trading and assets within the market. And the thing is, they are always working on making it even better than it already is. They don’t want to just stop at good enough, but instead continue to be great providers.
The xStation5 and xStation mobile trading platforms are award-winning for a lot of great reasons. One of the top reasons is they have superior trade execution speeds. They also have everything from charts trading to calculators to market order depth available.
The trading platform is 100% customizable to your trading needs and style. Something else that is advantageous for penny stock trading is the fact that you won’t be paying commissions for most of these trades. They have commission free trading up to £100,000 every month. This gives you a lot of room in the world of penny stocks.
Not only are you investing on a budget with your penny stocks, but you aren’t paying excessive fees for minimal dollar trades. It’s pretty a much a win-win in our opinions.
Drawbacks 👎️
The biggest drawback we can think of is your potential for a conversion fee, or potentially the withdrawal fees. People trading in penny stocks usually have low dollar amounts they are working with. That doesn’t cover all of them, but the concept is to use low amounts here.
If your trade requires a monetary conversion, you’re going to pay a .5% fee on that conversion. These costs are what can add up. In addition, there are requirements to maintain a minimum balance with your withdrawals, or you may have to pay a small withdrawal fee as well.
These are not dealbreakers, but they are certainly important to be aware of.
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2. Interactive Brokers – Best Trading Mechanisms
The key to finding a good broker of penny stocks is to focus on finding an established broker that does not charge steep commission fees.
That is the first step you should take because commission fees will be the death of making profits. They are small fees charged by the platform for facilitating the trade.
Interactive Brokers is a broker that provides excellent trading platforms with zero commission fees. This means that you can trade as many times and as frequently as you want.
But they also provide something else that you will need from a broker of penny stocks: Information. You see, one of the defining characteristics of penny stocks is their volatility. Their movements do not cover as much ground as a normal stock, having to do with the simple fact that they are lower in value.
But while they do not move as much overall, penny stocks still see a lot of movement. This is because they have a lot of “reversals”—instances when the stock goes from rising to falling, or vice versa.
Interactive Brokers gives you the information and analytics that you need to predict these reversals.
And if you want to play it safe, Interactive Brokers also allows for “fractional trading”. This is any trading that does not deal in whole stocks. This is a lot more common when buying the stocks of huge companies, where share prices can be ludicrously expensive. But it happens with penny stocks too.
Drawbacks 👎️
While Interactive Brokers has a lot going for it, there are two issues that it has that can hamper one’s ability to trade with them: The first is that it is definitely a broker focused on supporting experienced traders rather than beginners. This is evident through the vast array of options available to you.
The second issue is that the broker does not exactly specialize in penny stocks. This problem is far less of a problem than the previous one, as it just means that they do not offer any special interface options or incentives for penny stocks. They still trade in them though, and the interface is fine to work with.
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3. Tradier – Best for Frequent Traders
It is generally accepted that there are two kinds of traders.
The first is retail traders, sometimes called retail investors. These are the average person, individuals who make their money through some profession other than trading stocks. They then use that money to invest for fun and profit.
The other kind of trader is the day trader. These are the people who pay their bills by making trading their primary profession. This is the kind of trader that the broker Tradier benefits the most.
The reason for this is that rather than charging commission fees, Tradier has a £7.50 monthly subscription fee. This does not do much for someone who does not trade that frequently, but for someone whose primary income is through trading, exchanging commission fees for a monthly fee is a great trade-off.
Tradier is also a highly customizable broker, allowing you to craft your own dashboard to focus on the trades you know will work for you. Whether those trades are normal stocks, CFDs, or options.
This is great for both day traders and people interested in becoming day traders, as being a day trader is less about finding the right trades and more about using those you already have.
Naturally, in order to facilitate the moment to moment trading that day traders to, Tradier provides moment to moment updates on what is going on in the market. Their knowledgebase is not the best, but their tracking metrics and analytics are absolutely top notch.
Drawbacks 👎️
If there can be said to be anything wrong with Tradier, it is definitely its interface. While its customizability definitely makes this tolerable, it is a notably dry interface that does not give you much visual indication of what is going on. If you dislike the look of spreadsheets, you are going to dislike this.
Despite looking like it comes from the early 90s, it is still perfectly responsive. It just combines with the monthly subscription to create a user experience that is poor for newer traders. There are is so much that you can do with Tradiers that newer traders are probably not going to realize they even can do.
Finally, although Tradiers has access to international markets it is notably lacking in the departments of mutual funds and indexes. These can be found and tracked elsewhere, but it is odd that it lacks them. These are not commonly sought out in the context of penny stocks though.
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4. Webull – Best Penny Stock App
While your average broker is going to give out a license to a larger trading platform, you have probably noticed that just about every big broker has their own trading platform.
This is part of the reason the difference between each broker is so significant—some trading apps are simply better than others.
The Webull app is one that is so good that it is better than the broker that carries it. The Webull app is seen as one of the top competitors for “best stock trading mobile app”. This strength as a trading app carries over to trading penny stocks, as its strengths include no commission fees and good interface.
Because it is operated through a mobile app, Webull is user friendly. But there are plenty of user friendly mobile stock trading apps—what really sets it apart is being user friendly while also providing tons of analytics. These include things like economic calendars and technical indicators of trade trends.
It also pulls in trades from markets all over the world. This, combined with its popularity as a mobile trading app, affords Webull one of the best communities of all the penny stock trading brokers.
Drawbacks 👎️
Perhaps because of its focus on usability, Webull lacks many of the stock trading methods that other brokers offer. That means you cannot trade CFDs or options, much less foreign currency or commodities. Even though you can communicate with other traders, you cannot set these up either.
Webull is a strong broker, but its focus on usability means that it is not easily optimized by more advanced traders. It still has plenty to offer traders with more experience though.
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5. Robinhood – Best Beginner Broker
Robinhood is not a broker in the way that the rest of these brokers are. Before Robinhood came along the idea of a stock trading app on your phone was still a pipe dream. People knew that making stock trading more accessible was the thing to do, but many companies were unsure how to do it.
The basic issue was that of how to condense the massive amount of information that you need to reliably make a profit off of stocks onto the screen space and interface of a phone.
Robinhood’s solution was not everyone’s favourite solution, but it is the solution that many beginner traders prefer: Just leave that information out. After all, if most of your trading is done on your phone, then you can easily use another device to get the information you need.
The end result is an app that has a huge userbase, easily the biggest in the world, as well as a sleek and intuitive interface that is great for beginner traders. If you really want analytics on how to get the best penny stocks out there, Robinhood has a newsletter that clues you into what is trending at the moment.
All of this is aided by its community. While the community is of questionable integrity at times, it can at least be relied upon to fill the gaps left by the app itself.
Drawbacks 👎️
Anyone who is really looking for a penny stock trading app will notice that in all the qualities we mentioned, there was not a word spoken about how Robinhood benefits penny stocks specifically.
That is because the app will host penny stocks, but it is not uniquely good for them. Similarly, the complete absence of analysis tools means that it can be hard to tell the good penny stocks from the bad.
Luckily, they still have tracking tools so if you find yourself needing to follow particularly trustworthy stocks, you have options. The last thing to consider is the fact that all accounts must be taxable. This is not a deal breaker for most beginner traders, but it certainly will be for experienced traders.
In general, the lack of complex and risky tools will be a turn off for most experienced stock traders. Robinhood is a good starting point, but not a good platform to try and make a living.
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6. TD Ameritrade – Best Scalability
It is always tempting to draw a line between the apps designed for beginner traders and the apps designed for experienced traders.
Generally, this is not a terrible practice. Apps will design themselves around this divide. But what if an app could instead focus on developing a trader’s knowledge?
That is part of what makes TD Ameritrade such a good broker. Their app has one of the best knowledgebases and research hubs we have seen. But more importantly than that, rather than their knowledgebase being restricted to a series of dry articles, they are presented as tutorials.
Not only that, but you can choose how deeply integrated these tutorials are with the trading experience. Perhaps the most unusual aspect of TD Ameritrade’s design is the fact that it uses risky securities.
It should be noted, penny stocks are already plenty risky. They are appealing to beginners for their price, but much like the TD Ameritrade app, their complexity means there is always something there for those with more stock trading experience.
This means that you risk a lot by trading CFDs and options of penny stocks. Luckily, TD Ameritrade’s knowledgebase and tutorials will help you mitigate that risk. They can never make that risk fully go away, but they can stemmy it to an extent.
Drawbacks 👎️
While TD Ameritrade is generally a great place for beginner traders, they might not know it from looking at it. The broker puts a focus on things like margin trading and the selling of less common securities. These are difficult to grasp, hard to use, and unintuitive.
Worst of all, they compete for space against everything else on the app. It is not a poorly designed app, but it is cluttered. Even an experienced trader might have trouble finding what they are looking for.
Still, the lack of any kind of fees on the app make it highly appealing to everyone. So, even if your first impression is bad, just know that it is an app designed to take you from zero to hero.
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7. Charles Schwab – Best Futures Trading
Trading futures is risky, but as discussed earlier the whole practice of trading penny stocks is risky to begin with.
Futures are contracts to buy a stock at a later date for a price set up at an earlier date. This is risky because you might be setting yourself up to pay much more than a stock is worth later.
But it also means that you might end up buying that stock for much less. Since your ability to navigate those trades is a matter of skill, risky securities like that are a favourite among traders both new and old.
Charles Schwab is a broker that focuses on that sort of security. They actually have access to a wide range or securities, but you can tell that futures are their focus based on how they run their community.
Their knowledgebase does not work like most brokers’ knowledgebases. Rather than being built around articles and lessons, Charles Schwab builds it around infographics, animated videos, and podcasts. In short, their priority is making learning from this knowledgebase fun and engaging.
And of course, most of the information contained therein is about how to maximize the value of futures. It creates a flow of information and action that is easy to fall into, without obstructing the rest of the app. It also serves as a great way to learn about these securities if you have little experience with them.
Drawbacks 👎️
Penny stock traders will notice before anyone else that Charles Schwab’s commission fees are inordinately high. With a fee of around £3.75 per transaction, it is hard to get value out of a trade.
Remember, penny stocks cap out at £3.75. That means unless you are buying and selling in bulk, you are always going to take a hit on anything that is less than a highly profitable penny stock trade. While it is nice to imagine, it is highly improbable that you are going to strike gold with penny stocks.
£0.75 securities do not become £7.50 securities for no reason, so there is just about no way to get out from under Charles Schwab’s £3.75 commission fee unless you trade in such volumes that it is meaningless.
Aside from that, Charles Schwab also has higher margin rates than most brokers. Penny stocks and margin go hand in hand, as trading on margin means buying stocks with a loan and using the money made from those stocks to pay the loan off. You can get far with a small loan on penny stocks.
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8. TradeStation – Best Bulk Trading App
There are generally agreed to be two ways to trade penny stocks: You can either trade a few stocks extremely quickly, or you can trade in enormous piles of stocks. TradeStation favours the latter.
Tradestation allows for trading and withdrawing of funds without fees for the first 10,000 trades.
TradeStation allows for trading and withdrawing of funds without fees for the first 10,000 trades. That is quite a few, and certainly a number you would never hit if you were a retail investor trading normally. But if you are trading penny stocks in large amounts for a living, you will need every one of those.
Luckily, once you hit 10,000 trades you still get commission free trading. You can even get rid of the other fees associated with trading if you get the right kind of account. Just remember that the accounts with the fewest barriers between you and your money also require steep minimum deposits.
This is a security feature as well as a method to keep you invested in the app. It means that while the app does focus on penny stock trading, you do not have to worry about running into bots.
This is good, because the app also features a wide variety of far more risky securities that would be hard to manage in large quantities if you had to worry about bots buying and selling them all the time.
Drawbacks 👎️
TradeStation’s drawbacks are not going to be highly noticeable until you use them. The real issue is the fact that the fees that it does and does not have, the costs involved with different kinds of accounts, on top of the complexity of the securities it offers mean there is a lot of ways to lose money on the app.
Losing money is, to some extent, expected on a trading app of any kind. But the issue here is that you are losing money to the app’s confusing fee and pricing structure. There are a lot of situations where you do not have to pay a fee, but they are more on a case by case basis than any universal rules.
It also results in the layout of the app being noticeably cluttered, as there is reminder text for just about every rule that might cause you to trip over even the most minor of fees.
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9. Firstrade – Best Retail Investor Trading
The thing that most people do not understand about retail investors is their motives. Most people imagine that the only valid reason to get into the stock market, particularly with a security like penny stocks, is to try and find a winning lottery ticket that will make you get rich without a lot of work.
But when it comes to retail investors, many just want a retirement fund for themselves or an education fund for their kids. That is what Firstrade offers that is exceptional: Rather than focusing entirely on making the most profits possible, Firstrade allows for the possibility of long term goals.
This is surprisingly uncommon, especially among brokers that are focused on penny stocks. But Firstrade achieves it not just with their app, interface, or lack of commission fees. They also make sure to help you by providing walkthroughs on how to set up the right kind of accounts to make the process tax free.
Many day traders would kill to make their trades tax free, always forgetting that certain retirement accounts that make capped amounts of money are tax free to begin with.
Despite this focus on long term plans, Firstrade does not shy away from having riskier securities either. If you want to build your finances over time, but still want the option to try for greater profits, then Firstrade will offer you all of that without taking commission fees.
Drawbacks 👎️
Firstrade’s biggest problem is quite surprising. After hearing about how focused it is on the goals of retail investors, you might expect it to be highly usable, with a clean interface.
Much to our surprise, Firstrade has a dense interface. Its accounts are complicated, and its knowledgebase, while thorough in the information it provides, is difficult to navigate.
In short, while it may play to the goals of most traders, it will definitely be hard to get into for most traders. Come prepared to read and click the back button a lot.
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10. Fidelity – Best Stock Trading Advice
If you want to get into penny stock trading, it is best to do so with a good reason. Saying that you want to make money is easy enough.
But if you know why you are making money, then you can actually start to make a plan of the amount of money you need to make, when you need to make it, and how.
For instance, if you want to make money so that you can eat and pay bills, then your investment strategy is going to be very different than if you want to make money so you can retire someday.
Fidelity is a great broker for supporting learning about these different investment strategies. While most brokers have some sort of research and knowledgebase to help you understand how to trade, Fidelity supports you with financial advice agents that are there to help you construct an investment strategy.
That means walking you through a few different things:
- You will work with them to figure out what your motivations are for trading penny stocks. This is important for all of the next steps.
- They will help you sign up for the right account options. That way you can retrieve and provide whatever tax details you need as your account develops.
- And of course, they will help you with the actual investment process.
That last part is particularly important as it is not a service you can get at most brokers.
All of this help is critical navigating Fidelity’s investment options for newer investors. Obviously, more experienced investors are not going to need this help. This allows Fidelity to be a highly scalable broker, since you can start off getting all the help you need and scale up to just using their vast options unaided.
Fidelity lacks foreign currency, cryptocurrencies, and commodities. But it makes up for it by having basically every other security there is. That includes stocks, options, CFDs, futures, and even indexes.
Drawbacks 👎️
Let’s come right out and acknowledge it: Fidelity’s interface is bad. But while it is bad, the exact reason why its bad might elude some people. They will click through it, retain no information, and wonder what happened. The issue is that every page looks the same.
Whether you are reading up on market analytics or signing up for an account, there is little visual indication of what you are doing on Fidelity besides the text itself. And yeah, “Just read the text, genius,” but there is so much information on the site and the app that doing so would take ages.
Many feature-heavy brokers have to deal with how hard their apps are to navigate for new traders. This is a rare case of the app being hard to navigate for everyone. But of course, looks are not everything.
While lacking in the usability department, Fidelity still provides some of the best counselling you could ask for, while still providing a huge variety of methods for trading penny stocks.
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How Penny Stocks Work
Stocks are curious things. They represent percentages of a company, but it is extremely rare that a company has so few stocks that any given stock represents a whole percentage. Much more commonly, a stock will represent a fraction of a percentage, as companies can release more stocks at will.
Because of this, some companies choose to keep their stock prices low by continually releasing stocks as their stock price climbs. In this situation, the company is working to force their stocks to be penny stocks. Why do this? Because it also means control of the company is divided more and more.
With each release of stocks, each stock not only shrinks in value but also shrinks in the total amount of the control that it represents over that company’s finances. This keeps the stocks from being controlled.
Therefore, by trading penny stocks a company can keep people interested in the stock while making sure that no one ever becomes such a powerful shareholder that they decide how the company works.
Of course, this sours the image of the company in the eyes of some investors. But the kinds of investors that are looking to control a company through buying its stock are usually not the kind of investors who you want getting control of your company.
What Tools do You Need to Trade Penny Stocks?
Trading of penny stocks happens on trading platforms. These are apps that can be operated through a web browser, although some can also be installed on phones and tablets. The important thing to know about these trading platforms is that you need a license to be able to install and use them legally.
This license can be acquired through two means: The first is costly, as it involves buying the license yourself. Many industries have schemes like this: Whether it is construction equipment, taxi cab badges, or photo editing software, the companies that make these products demand subscriptions to use them.
The other, far more economical way to acquire this technology is by getting a license from a broker.
Brokers are entities that are connected to the stock markets, either of your own country, other countries, or a plurality of countries. They can be individuals, but more often they are businesses.
You can’t trade stocks without a platform, and you can’t get on a platform without a broker.
Why Trade Penny Stocks?
So, with all that business about brokers out of the way, let’s answer an important question: Why trade penny stocks in the first place? We know how they work. We know how to get them. But why?
The reason this is a good question to ask is because, as stated before, penny stocks are slightly different than normal stocks.
The most obvious way they are different is that they are cheaper. But they also shift in value more frequently and will more often be handled in bulk.
But none of that is the reason why you, or anyone else, should trade in penny stocks. The main reason people trade in penny stocks is because their volatility presents opportunities to make easy money.
No one in the stock market likes to call it “easy money”. If they call it that, then the market becomes crowded with people who are looking to make easy money. That causes it to lose value.
The stock market is built on the backs of people who show up looking to exploit the risks other people take for easy money, only to get exploited and be turned into the easy money themselves. This is just how it is. Penny stocks exemplify that by being a security that is designed to be temperamental.
Why are Volatile Stocks Profitable?
When a stock’s value shifts frequently, it is called a “volatile” stock. These stocks are desirable to many traders because they are the stocks that are most open to being used to make profits.
Imagine that you have two buttons. They both change colours, from red to green. If you press the button while it is green, you make money. If you press it while it is red, you lose money.
But there is a catch: One of the buttons changes from red to green every couple of years, and only stays green for a day. The other button changes from red to green every few seconds… Except sometimes it stays red, or changes from green to red in less than a second.
The volatile button offers more opportunities to both lose and make money. The stable button, on the other hand, allows more safe and reliable opportunities, but it ultimately less profitable. If you can learn how to press the volatile button at the right times, you will make far more money.
Conclusion
Penny stocks are not the safest stock to trade, but their low cost of initial investment means that they are also far from the most risky.
Depending on what kind of investment strategy you have, as well as what level of experience you are at, there is a broker for just about every investor out there.
Just be sure to choose carefully and figure out what you want to do before you spend money.
