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Trading and investing are discussed by more people now than they were many years ago. The internet and people’s connection to one another has made the benefits of trading mainstream. More and more people are viewing this as a source of additional income.
The increase in trading might also have to do with the increase in trading opportunities, especially with people able to trade from their homes and on their phones.
There has been an increase in all sorts of trading, including trading in penny stocks. Trading has risks and choosing a platform that doesn’t suit you will be detrimental. So, what is the best trading platform for penny stocks?
They will examine the penny stock trading platforms with the highest ratings, examining their strengths and weaknesses so you don’t have to figure that out for yourself. A discussion of what you should know before trading penny stocks will also be included.
- 1 Characteristics of Penny Stocks
- 2 Where They are Traded
- 3 Risk/Reward Balance
- 4 Ease of Liquidating
- 5 Available Information
- 6 Things You Should Know Before Choosing a Trading Platform
- 7 Best Trading Platforms for Penny Stocks
- 8 Which Trading Platform is Best for Penny Stocks?
- 9 Final Thoughts
Characteristics of Penny Stocks
You might have heard about penny stocks or even been advised by a friend to consider trading in them without knowing what they are.
Stocks of small companies that trade for less than $5 per share are called “penny stocks.” They differ from other types of stocks in a few ways, such as where they are traded, their risk/reward balance, and ease of liquidation.
Where They are Traded
While some penny stocks are traded on the New York Stock Exchange, a larger number of such stocks are traded over the counter (OTC) through over-the-counter bulletin boards or through market groups that are privately owned.
There is no trading floor for penny stocks since all transactions are done electronically.
Penny stocks have attracted most of its investors with their potential for high rewards. Identifying a small company with potential for growth that is currently undervalued may lead to high returns if you invest in it and it grows.
However, just as the potential for reward is high, so is the risk. Penny stocks come from small companies that aren’t established, and these companies can sink or lose most or all their value quickly. If you trade with stocks of such a company, you might lose a lot of your capital.
Ease of Liquidating
The problem with penny stocks is that they are traded in low volumes, making it hard to buy or sell such stocks in large volumes. You might influence the stock price if you buy or sell them in large quantities.
So, exiting an investment is difficult since you might struggle to sell your stocks without affecting the stock price. The difficulty in liquidating your stocks is one reason why experienced investors use a small portion of their portfolio to trade in penny stocks.
The information you will get before you begin trading in penny stocks will be limited in comparison to other forms of investment. Companies are required to disclose performance metrics for other types of investments.
In smaller companies trading in penny stocks, such information isn’t always available making it riskier to purchase the stocks. Companies that trade in penny stocks aren’t mandated to file with the Securities and Exchange Commission (SEC), so information on such companies’ performances and potential might be limited.
Things You Should Know Before Choosing a Trading Platform
Before you choose a trading platform, you need to understand it and how your choice will influence your trading experience.
A trading platform is software that investors and brokers use to place trades and monitor these investments. It is network-based software.
To build your portfolio without going through brokers, there are factors to consider when selecting a trading platform.
- You will need to think of the fees. It is important to know the fees of a trading platform before deciding to use it. Generally, platforms with high fees have more features, and these fees will affect your profits.
- Ensure you meet the user requirements. Different platforms have different requirements which determine the type of investors that can use them. So, ensure you meet the platform’s requirements and in turn assess the platform to see if they meet your goals and requirements.
- Examine a platform’s features and see if they are what you want. The features a trading platform offers are one thing you must consider. You shouldn’t pick a platform simply because the fees are lower than others or because you meet the requirements. It is important to choose a trading platform that aligns with your experience and objectives.
- Verify the platform’s authenticity. The trading platform you choose shouldn’t have bad reviews from traders using it. It shouldn’t also have suspicious elements surrounding it, like an insecure website or shady payment channels.
Best Trading Platforms for Penny Stocks
When you have properly examined your trading goals and built your portfolio to the desired level, you will have to choose a trading platform to use. The best trading platform for you must meet your needs and not just be one that a friend or colleague uses.
There are many trading platforms for penny stocks, but which one is best for you? Let’s find out.
ETRADE is a known name in the trading industry with many investments to trade on. It used to be called TradePlus when it was founded in 1982, and it made its first online trade just 12 months later. ETRADE currently has about half a billion dollars in assets.
- Platform has over 4 million active brokers, providing security.
- Good choice for beginners and those learning penny stock trading.
- Platform offers helpful resources and easy-to-use design.
- E*TRADE is good for beginners but not advanced traders.
- It has useful tools for learning but not for all trading situations.
- The starting price can be higher than other platforms.
Overall, E*TRADE is a solid choice for traders looking to trade penny stocks. The platform is user-friendly, and the research and analysis tools, low commissions, and availability of educational resources makes it a viable choice for traders at any level. However, the limited selection of penny stocks and the inactivity fee may be drawbacks for some traders.
Charles Schwab is older than E*TRADE, being founded in 1973. It was always one of the more accessible trading platforms, removing 50% of its fees when the SEC deregulated the securities industry. Today, it is an investment advisor and a full-service brokerage.
Charles Schwab is another broker option because:
- The trading platform offers free penny stock trading without commission fees.
- Trading tools and charts are customizable and reliable for experienced traders.
- Full-service brokerage is also available on the platform.
- Standard broker-assisted fee of $25 contrasts with competitive $0 trading fee.
- Limited educational resources not ideal for new investors.
- New investors using Charles Schwab will need to pay for broker assistance.
- Overwhelming number of options and services may discourage new investors.
In summary, Charles Schwab can be a good option for traders who want to trade Penny Stocks, but it’s important to be aware of the limitations and restrictions of the broker. The low commission fees, wide range of investment options, and educational resources can be big advantages, but the limited availability of certain Penny Stocks and lack of access to the OTC market may be a drawback for some traders.
Every penny stock list mentions this trading platform. It is a platform that focuses on active, experienced traders but not long-term ones. The platform endeavors to position itself as a top choice.
TradeStation has many advantages that include
- Diverse trading plans: TS Select and TS Go cater to different trader types and goals.
- Multiple platforms: Desktop, web, and mobile app with varying features for different needs.
- Trading securities: Offers a variety of securities for experienced traders.
- Direct crypto trading: Low commission rates on various cryptocurrencies.
- Limited penny stock resources: Lacks fundamental analysis and education for OTC trading.
- Not ideal for long-term investors: Complicated tools unnecessary for long-term strategies.
Overall, TradeStation can be a good option for penny stock traders who are looking for a low-cost broker with advanced trading tools and educational resources. However, the minimum deposit and data fees may be a consideration for some traders, and it’s important to carefully evaluate the costs and benefits before opening an account.
There are different types of trading platforms geared toward different audiences. Rather than trying to be everything to everyone, Lightspeed focuses on what it does best. It doesn’t do everything well, but what it does well, it does really well.
Here are a few pros when using Lightspeed Trading:
- Multiple platforms: Desktop, mobile, and web to suit various needs.
- Commission discounts: Active Trader Group Pricing for meeting monthly thresholds.
- Fast order routing: Proprietary platform ideal for high-velocity penny stock trading.
- High initial funding: $25,000 for Lightspeed Trader, $10,000 for WebTrader.
- Maintenance fee: $25 per month for accounts under $15,000 in value.
- Limited beginner-friendly tools: Not ideal for new investors.
In conclusion, Lightspeed Trading has several advantages for penny stock traders, including low commission fees, fast execution, and a robust trading platform. However, the high account minimums and steep learning curve may be drawbacks for some traders.
Which Trading Platform is Best for Penny Stocks?
You might get different answers if you ask for the best trading platform for penny stocks, and that is expected because the best option is the one that suits your needs.
Trading platforms have their strengths and weaknesses, and you will have to look at your goals to see if a platform’s strengths match them and if you can easily manage the platform’s weaknesses.
Ultimately, you need to understand your position in the market, your portfolio, your trading goals, and your risks. By understanding these parameters, you can select the best trading platform.
Penny stocks are stocks of small companies and are usually less than $5 in value. Since they are the stocks of small companies, they are very volatile and difficult to liquidate. So, if you are going into penny stocks, allocating a small portion of your portfolio may be a prudent approach.
There are many penny stock trading platforms, but the best one for you depends on your trading experience, your trading goals, your preferred trading gadget, and your portfolio size. In the end, you are the one who can choose the best trading platform for you. They just help by telling you what to expect.
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