Best Penny Stock Trading Apps: Free Trades, Welcome Bonuses, and More

Investors are fascinated by penny stocks. The low-priced shares allow you to buy in large blocks and potentially earn outsized gains if and when the stock price takes off.

But if you want to invest in penny stocks, you should be aware that not all brokers allow the practice. To help you in your search, we’ve compiled a list of what we believe to be the six best penny stock trading apps available right now. But first, let’s take a closer look at what makes a stock a “penny stock.”

Table of Contents
  1. What Is a Penny Stock?
    1. 1. Charles Schwab: Best Overall
    2. 2. Fidelity: Best for Fund Investing
    3. 3. E*TRADE: Best Welcome Bonus
    4. 4. TD Ameritrade: Best Trading Platform
    5. 5. TradeStation: Best for Cryptocurrencies
    6. 6. Robinhood: Best for Trading On-The-Go
  2. Are Penny Stocks Risky?
  3. Is it Possible to Make Money Investing in Penny Stocks?
  4. Final Thoughts

What Is a Penny Stock?

Stocks that trade at under $5 per share are often called penny stocks. In other words, the term doesn’t only refer to stocks that trade for, say, $.57 or $.23.

The $5 threshold is somewhat arbitrary. But when a stock trades below that level, it’s considered speculative in nature. That’s because the low price is indicative of a company that’s either brand-new, close to going out of business, or has no earnings and little prospect of generating any in the foreseeable future.

Many of these stocks trade “over-the-counter,” a term to describe securities that don’t trade on the major stock exchanges, like the New York Stock Exchange or the NASDAQ.

Though some penny stocks trade on the major exchanges, they are at high risk of being delisted by the exchange if they fail to meet its minimum requirements.

Now that you understand how they work, here are the best places to buy penny stocks.

BrokerageBonus PromotionLink
$200-$250 in stocksLearn more
up to 12 free stocksLearn more
up to $25,000Learn more
Free StockLearn more
Up to $500 cashLearn more
Up to $625 cashLearn more

1. Charles Schwab: Best Overall

What we like: Commission-free penny stock trades (except OTC stocks).

Charles Schwab is the largest retail brokerage firm in the world and features a combination of some of the best investment tools and customer service in the industry. Like most brokerage firms today, they offer commission-free trades on stocks and exchange traded funds (ETFs). They also offer a large selection of commission-free mutual funds and managed portfolio options.

Penny stock investors should know that Charles Schwab charges a commission on over-the-counter (OTC) stocks.

Charles Schwab Features:

  • No minimal initial investment amount
  • Joint and individual taxable investment accounts; trusts; traditional, Roth, rollover, SIMPLE, and SEP IRAs
  • Penny stocks permitted with a Schwab One account
  • Bonds, ETFs, mutual funds, options, and futures are also available
  • Managed portfolio options
  • $6.95 per trade for OTC stocks; commission-free trades on stocks and ETFs
  • $0 commissions plus $0.65 per contract for options
  • over 4,000 no-fee mutual funds
  • 24/7 telephone and live chat support; 360 branch locations

Charles Schwab Pros:

  • No trading fees on most investments, including penny stocks listed on major exchanges
  • Wide range of investor tools, research resources, and investor education
  • Industry-leading customer service is available on a 24/7 basis, in addition to well over 300 local branches if you prefer face-to-face contact.

Charles Schwab Cons: 

  • Additional $6.95 fee for OTC stock trades

Learn more about Charles Schwab

2. Fidelity: Best for Fund Investing

What we like: Commission-free trades, even on OTC stocks.

Fidelity is another vast, well-diversified investment brokerage firm. It operates very similar to Schwab, offering essentially the same services. That includes commission-free trades on stocks and ETFs. Otherwise, Fidelity offers virtually every other type of investment available. In addition, they also provide several managed portfolio options.

You’ll need to specifically enable penny stock trading in your account for penny stock trades. It’s a one-time, online process used to confirm your understanding of the risks involved in this unique type of investing. Fidelity also requires trading only with settled cash. For that reason, you will need to allow four-to-six business days to process sold positions.

Fidelity Features:

  • no minimum initial investment amount
  • individual taxable investment accounts; traditional, Roth, and rollover IRAs
  • Can only complete penny stock trades with settled cash (no margin trading)
  • Individual stocks, bonds, ETFs, mutual funds, futures, and managed portfolios are also available
  • No special pricing on OTC stocks
  • Commission-free trades on stocks and ETFs
  • $0 commissions plus $0.65 per contract for options
  • More than 3,000 no-fee mutual funds
  • 24/7 telephone support; 140 branches nationwide

Fidelity Pros:

  • No trading fees on most investments, including OTC stocks.
  • Arguably the largest selection of low-fee ETFs in the brokerage industry.
  • Wide range of investor tools, research resources, and investor education.
  • Active Trader Pro is one of the best trading platforms in the industry.
  • Customer service is available on a 24/7 basis and includes more than 140 local branches.

Fidelity Cons:

  • You can only trade penny stocks with settled cash (standard industry requirement.)

Learn more about Fidelity

3. E*TRADE: Best Welcome Bonus

What we like: Industry-leading investment tools and resources, plus the new account bonus.

Now a subsidiary of Morgan Stanley, E*TRADE is a popular brokerage platform with self-directed investors. The broker is famous for having some of the best trading tools in the industry and offers investing in nearly every asset class. They are currently offering a bonus of up to $3,500 when you open a new account.

Penny stock investors should be aware that E*TRADE does charge a commission on OTC stocks, but the fee is reduced by $2 per trade if you make 30 trades per month.

E*TRADE Features:

  • No minimum initial investment amount
  • Joint and individual taxable investment accounts; trusts; traditional, Roth, rollover, and SEP IRAs. 
  • Higher commissions on OTC stocks
  • Individual stocks, bonds, ETFs, mutual funds, currencies, options, and futures are also available
  • E*Trade has its own robo-advisor
  • $6.95 per trade for OTC stocks, or $4.95 per trade with at least 30 transactions per month
  • Zero commissions on listed stocks and ETFs
  • $0 commissions, plus $0.65 per contract for options
  • Over 4,000 no-fee mutual funds, otherwise $19.99 per trade
  • 24/7 telephone, email, and live chat customer support

E*TRADE Pros:

  • Offers some of the best trading tools and resources in the industry
  • Commission-free trades on stocks and ETFs, though there are fees on OTC stocks.

E*TRADE’s Cons:

  • Charges a fee of up to $6.95 per trade for OTC stocks

Learn more about E*TRADE

4. TD Ameritrade: Best Trading Platform

What we like: Industry-leading trading platform, including investment tools and resources.

TD Ameritrade offers their ThinkorSwim trading platform, generally recognized as one of the best in the industry. As a diversified brokerage firm, you can trade all types of investments, including penny stocks.

Investors should know that Charles Schwab has taken over TD Ameritrade. And while it will continue to function as an independent brokerage platform, it is expected to be integrated with the Schwab system by 2023. 

TD Ameritrade Features:

  • No minimum initial investment amount
  • Individual and joint taxable investment accounts; traditional, Roth, and rollover IRAs; 529 and Coverdell education accounts; custodial accounts available
  • A higher commission charged on OTC stocks
  • Individual stocks and bonds, ETFs, mutual funds options, futures, and FOREX are also available
  • $6.95 per trade on OTC stocks
  • No commissions on stocks or ETFs
  • $0 commissions on options, plus $0.65 per contract
  • Hundreds of no-fee mutual funds
  • Managed portfolios available from 0.60% to 0.90% per year.
  • 24/7 telephone support

TD Ameritrade Pros:

  • Industry-leading trading tools
  • No minimum initial investment required
  • No commissions on stocks, ETFs, or options

TD Ameritrade Cons:

  • Does charge commissions on OTC stocks
  • No fractional shares investing available
  • High commissions on no-load mutual funds.

Learn more about TD Ameritrade

5. TradeStation: Best for Cryptocurrencies

What we like: The ability to trade crypto and penny stocks on the same platform

TradeStation is one of the best trading platforms in the industry. That’s because it’s a broker catering to professional and institutional traders. For that reason, it’s a better choice for more advanced investors, rather than beginners or even intermediate-level investors. If you trade penny stocks you may also be interested in cryptocurrency trading. If so, you can invest in both asset classes on the same platform. Available cryptocurrencies and crypto pairs include Bitcoin, Litecoin, Ethereum, USDC, and Bitcoin Cash. You can even earn up to 6% interest on eligible crypto assets. 

TradeStation Features:

  • No minimum initial investment amount
  • Individual and joint taxable brokerage accounts; traditional, Roth, SIMPLE, and SEP IRAs available
  • Stocks, bonds, ETFs, mutual funds, options, futures, and cryptocurrencies also available
  • Commission-free trades on stocks, ETFs, and options (plus $0.60 per contract)
  • $14.95 for mutual fund trades
  • Phone and live chat available M-Th, 7:30 AM to 6:30 PM, Fridays, 7:30 AM to 5:00 PM, all times Eastern

TradeStation Pros:

  • Commission-free trades on penny stocks. 
  • Participate in a trader community where you can swap strategies and information, which may be more critical for penny stock traders.
  • Offers cryptocurrency trading

TradeStation Cons:

  • $2,000 minimum initial deposit to open a TS Select account. 
  • Charges an additional fee on trades of more than 10,000 shares
  • Designed for more advanced traders.  
  • Annual IRA fee of $35

Learn more about TradeStation

6. Robinhood: Best for Trading On-The-Go

What we like: Ideal for less-experienced investors

In recent years, Robinhood has been coming up fast, appealing especially to younger investors. Much like TradeStation, they offer trading in cryptocurrencies and traditional investments. But they do have a more limited selection, excluding assets like mutual funds, bonds, and foreign stocks.

Robinhood does offer trading in penny stocks, with no commissions charged on OTC stocks. However, you should be aware that their selection of OTC stocks is somewhat limited, which will also limit your penny stock investment options. For more information, check out our full Robinhood review.

Robinhood Features:

  • No minimum initial investment amount
  • Individual taxable investment accounts only
  • A limited selection of OTC stocks
  • U.S. stocks, ETFs, options, and cryptocurrencies are also available
  • No commissions on U.S. stocks or ETFs
  • Customer support is email only

Robinhood Pros:

  • No minimum initial investment is required.
  • No transaction fees for OTC stocks.
  • Offers cryptocurrency trading

Robinhood Cons:

  • Excludes “select” OTC stocks, so you won’t have unlimited penny stock investment options.
  • No IRA accounts offered
  • Customer support is limited to email

Learn more about Robinhood

Are Penny Stocks Risky?

Yes! Though it might seem like stocks priced so low are a “can’t miss” opportunity, the opposite is usually true.

While the investor might hope to see a significant increase in a penny stocks price, that’s not a typical outcome. After all, penny stocks are often little more than concept companies with shaky cash flows and no profits.

There are also risks inherent in the investment strategy itself. Examples include:

  • A penny stock listed on a major exchange can experience a price plummet after being delisted.
  • Brokers often impose purchase minimums on penny stocks. You may be required to purchase a minimum of 1,000 shares of a stock trading at $2, and the total investment may be more than you’re willing to make.
  • Because many penny stocks aren’t listed on major exchanges, they’re unregulated, and little public information is available. 

Penny stocks are frequent targets of “pump-and-dump” strategies. Promoters pump up a stock, typically with email campaigns, hoping to raise the price: the promoter bails when the value rises sharply, and the price collapses. 

Is it Possible to Make Money Investing in Penny Stocks?

The theory is if you can buy a stock at $2 and it rises to $20, you have a 1,000% profit. That’s undoubtedly sweet if it happens, but the likelihood is extremely low. It’s much more likely the company will go out of business, and you’ll lose your entire investment – small that it may be.

Penny stock promoters often promote a strategy in which you build a portfolio of these securities. The idea is that spreading your investment between 10, 15, or 20 companies can produce significant returns if just two or three of the stocks take off.

More than likely, none of them will take off. And if by chance one does, the losses sustained on the other stocks in the portfolio will almost certainly offset that gain.

Final Thoughts

We’ve covered six top penny stock trading apps for you to consider. Remember that while making an occasional play in the penny stock space may make sense, you should not give it a substantial allocation in your portfolio.

At most, you should dabble with a tiny slice of your portfolio, less than 5%, and be fully prepared to lose your entire investment. If you do dabble in penny stocks, be sure to maintain an otherwise well-diversified portfolio. It should include ETFs, mutual funds, investment quality individual stocks, bonds, and other fixed income investments.

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About Kevin Mercadante

Since 2009, Kevin Mercadante has been sharing his journey from a washed-up mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed "slash worker" – accountant/blogger/freelance blog writer – on OutofYourRut.com. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides "Alt-retirement strategies" for the vast majority who won’t retire to the beach as millionaires.

He also frequently discusses the big-picture trends that are putting the squeeze on the bottom 90%, offering workarounds and expense cutting tips to help readers carve out more money to save in their budgets – a.k.a., breaking the "savings barrier" and transitioning from debtor to saver.

Kevin has a B.S. in Accounting and Finance from Montclair State University.

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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