Penny Stock Broker Guide - Picking The Best Penny Stock Broker For You Step-By-Step

Let's face it.  Your success in penny stocks investments depends partly on your ability to choose the right broker. After all, it is your broker that will execute the trades of either buy or sell on your signal, thus, the better your relationship and communication with each other, the better it will be for your bottom line.  

Types of Brokers

You can choose from two types of brokers, the main differences being the types of services offered and the commissions asked.  First, you have the discount brokers that, as their name implies, offer affordable rates of commissions oftentimes for as little as $5 for every trade executed. 

If you wish to get the most out of your penny stocks investments in terms of lower costs, then discount brokers are for you.  Lest you think that you will be shortchanged on service, think again.  With an online discount broker, you can monitor and view your trade transactions and history as well as be provided with information and quotes on the penny stocks.

Second, you can also opt for full-service brokers.  Keep in mind that these brokers usually shy away from penny stocks, preferring instead to handle large accounts.  Thus, you should look for a full-service broker willing to trade in penny stocks although you have to pay a higher commission for his services. 

Choosing Your Broker

Regardless of whether you are going for a discount or a full-service broker, you must choose very carefully.  And if possible, let only one good broker handle all your penny stock accounts instead of distributing them to two or more brokers.  This way, you can keep better track of your investments. 

With that being said, you should choose a broker based on your personal requirements with the following criteria as a good guide:

  • Reasonable commissions - Remember that trading in penny stocks often means higher trade frequency at lower total dollar amounts.  Thus, your broker must charge competitive rates with the abovementioned fact in mind.  If you are being charged more than 10% commissions on the trades, then you might want to consider changing to another broker. 
  • Fast speed on order execution - Although penny stocks can sit in the same price range for a relatively long period of time, you want your broker to have the ability to execute your orders as fast as possible.  This is where communications technology comes in, which are also very important in ensuring that you have fast and easy access to your broker. 
  • Highly reliable - This is true for online brokers where website can go down, brokers can make mistakes and computerized trading programs can go haywire.  You have to make sure that the websites and the programs are up and running for majority of the time. Research on it, ask family and friends, and get recommendations, if you have to do so.
  • Excellent customer service - Ultimately, you are their customer.  As such, you should be provided with excellent customer service.  Or at the very least, customer service commensurate to the fees you are paying them.

When you have chosen the right broker, you are well on your way to making good profits in penny stocks.  This is because you might have just found yourself an ally in the often volatile world of penny stocks trading, an ally that can provide valuable inputs for your decision-making processes.