There is no doubt that all of the trading process should be carefully thought out and considered before you make any rushed decisions.
However, when you’re looking for and selecting an online brokerage, you should be absolutely sure to dedicate the right amount of time to inform yourself. There’s a lot of good tips for online brokerage finding here at https://www.timothysykes.com/blog/best-online-brokerage/.
When you’re trading penny stocks, the online brokerage that you use can either be one of the best parts or one of the worst parts of the entire process. However, what’s good is the decision lies entirely with you! If you take the time to find out what makes a good online brokerage, how to find one, and how to deal with one, then you should be able to get yourself trading without problems in no time at all.
Taking the time to find a good online brokerage is something that a lot of new traders and investors fail to do. This is probably mainly due to the fact that it takes time and research. This time and research are so very worthwhile at this stage though, compared to finding out the hard way 6 months in that you have signed up to and put your money into a terrible online brokerage, that is indeed making you broke instead of money!
All about penny stock brokers
A penny stockbroker is a broker that allows and provides a platform for penny stocks to be traded. Penny stocks are shares in companies that are trading at less than $5 each, or less than £1 in the United Kingdom.
Many years ago prior to the proper establishment of the internet, penny stocks could still be purchased but it was nowhere near as easy as it is today. With the internet, you can simply log in and purchase securities in minutes. Before though, you had to make a telephone call to a broker, for which you would most likely suffer high rates in commission, regardless of whether or not your investment was a good one. This was known as a full-service broker.
Today, commission rates are far lower thanks to online brokers. Now, the most common rates of commission are extremely low, anywhere between $5 and $20 per trade, typically. These brokers with commission rates such as this are known as discount brokers. Discount brokers, of course, do not offer the same level of service that full-service brokers do, but it’s for the vast majority of the time, not something that penny stock investors are looking for anyway – it eats into profits.
How to decide what broker is best for you
When looking for and trying to decide on which broker to use for your trading, you shouldn’t just go based on recommendations. Whilst recommendations and reviews are great, you should consider that you’ll most likely have different needs and wants from an online brokerage that other people do not.
You should choose your stockbroker in line with what you want to get from trading. For example, if you’re only planning on investing a couple of hundred dollars and stopping there, then you should make sure to look for a broker that doesn’t charge you a large amount to open an account. This will mean that you can keep as much of your starting fund as possible.
On the other hand, if you’re going to be looking to start trading regularly, then a broker that doesn’t charge a large rate of commission is likely to make more sense for you. If you are making 15 or 20 trades per week and being charged a commission on every one of them, you’re going to end up paying out a considerable chunk of what could have been your profits in commission.
Let’s take a look at some of the main points you should consider before choosing an online brokerage.
A small amount to open an account and start trading – it’s a good idea to look for a brokerage that’s not going to charge you a large amount to open an account. In fact, you should look for one that charges you the smallest amount possible whilst still being good in other areas. Paying out a large amount to join.
Avoid low-priced share penalties – due to the very nature of penny stocks, they are subject to low-priced share penalties. This means that, if you’ve got a lot of shares in your account that aren’t worth a lot of money, you could be hit with a low-priced share penalty.
Commission – Checking the commission rates that are charged by a brokerage is an absolute essential before you make any decisions. The commission is one of the main factors that can consume the profits that you make from penny stock trading. You should look for a brokerage that has either low or reasonably priced commission rates that aren’t going to destroy your profits.
Market restrictions – Through your broker, you’ll be able to trade on some different stock markets. The broker exits as a place to access and store your trades. Even though you might be starting off only trading penny stocks at the moment, you may decide that at a later point you want to go into trading different stocks and shares. Choosing a broker that allows you access to a number of different stock markets is always a good idea.
Customer service – A high level of customer service is essential. When choosing an online brokerage, make sure that there is a good level of well-reviewed customer service is a step that should never be skipped.
Hopefully, you feel a bit more informed in terms of what you should be looking for when opening a new online brokerage account. Most importantly, remember that you should tailor your choice to your needs, and not simply what others have told you is best.