Penny stocks are risky to play yet people love to trade them. Why? Purely because of the profit potential! It’s easier for a penny stock to move 50% in a single day, while big blue chip stocks such as Google barely move. While it’s great to aspire to become wealthy through low-priced stocks, the reality is different.

It’s a headache for British traders to even find a suitable penny stock broker that doesn’t charge high commissions and have a decent selection of shares under $5. Mostly you can only trade penny shares on legit exchanges such as the NASDAQ and access to OTC/pink sheet stocks will be limited.

1. Interactive Brokers

Interactive Brokers is my number one choice for UK penny stock traders. IB are not perfect, they do charge a surcharge of $0.005 per share which is not ideal. For example if you bought 10,000 shares the commission would be $50.

Despite the costs, Interactive Brokers have great trade executions and offer a good range of penny stocks to buy. Obviously the fees are more expensive than commission-free brokers such as Trading 212 but remember in the world of the finance – “there’s no such thing as a free lunch”. In the long run, poor trade executions with fee-free brokers will cost you money if you’re an active trader.

The minimum deposit to open an account is $10,000 (or non-USD equivalent) – roughly £7350. The minimum is $10,000 for the first 8 months and then $2,000 after the 9th month.

2. TradeZero

TradeZero is another popular penny stock broker in Europe. They are an offshore brokerage based in the Bahamas which allows traders to bypass the pattern day trader rule. For OTCBB, pink sheets and penny stocks below $1.00, the cost is $0.005 per share.

TradeZero is another commission-free broker, they don’t charge a fee for limit orders. As stated on their website, on free trades they make money selling their order flow to various exchanges.

If you’re interested in short selling penny stocks, TradeZero are also great at locating shares to short. The major downside is not everyone likes dealing with offshore brokers. $500 is the minimum deposit to get started.

3. DeGiro

Degiro is a low-cost Dutch brokerage firm, available to only European traders. They allow you to buy penny stocks that trade on major exchanges such as the Nasdaq, NYSE, Toronto Stock Exchange and Australian Securities Exchange etc.

Degiro doesn’t offer access to US pink sheets or OTC markets. They have a low account minimum of €0.01 for verification purposes. Overall a solid choice but you will be limited in regards to penny stock trading.

4. Trading 212

Trading 212 is the UK’s alternative to Robinhood. Similar to the other options on this list, they offer limited access to penny stocks but are slowly starting to add new companies.

Trading 212’s app and website is perfect for beginners who are trading for the first time. Minimum deposit amount is €1 and there are no charges for share dealing.

Conclusion

There you have it, these are my top picks for 2021. The reality is the demand for penny stock trading in the UK is relatively low compared to the US. Brokerages typically dislike penny shares because the people who trade them don’t have a lot of capital so they can’t make big commissions. Let’s face it, most day traders are degenerate gamblers without a strategy. I only recommend trading these types of stocks if you understand the risks and can afford to lose the money.

eToro is a social trading platform and brokerage with offices in the UK, US, Cyprus, Israel and Australia. The broker enables people to invest in a wide range of assets such as penny stocks, forex, crypto and CFDs. Their customers are mainly beginner traders with limited knowledge of the markets. Despite having 13 million customers it’s almost impossible to find an honest opinion.

So far I’ve only read fake reviews from websites looking to earn hefty affiliate commissions. The reviews are overly positive and fail to mention the downsides of using the broker. To be honest, I don’t blame them, but I don’t think it’s right to recommend a service without having used it before.

Day trading penny stocks is a tough industry. Roughly 90% of traders lose money and not having the right broker means you’re at a disadvantage. Movies like the Wolf of Wall Street glamorize trading, everyone wants to live the trader lifestyle. Thousands of people join hoping to make easy money without making the effort. Later they get angry when they find out the cold hard truth.

Is eToro a suitable broker for penny stocks?

The answer to this question depends on where you live. In the US there are dozens of brokers for penny stocks with cheap commissions and quick trade executions. In the UK, the options are far fewer.

While eToro does have some penny stocks on the platform, the selection is limited. The best option is to contact their customer service team to get the full list of eToro penny stocks, they don’t share this information publicly.

Is eToro a scam?

Despite the company’s negative reputation online, they are regulated within the markets they operate. eToro is regulated by the CySEC in the EU, FCA in the UK, FinCEN in the US and by the ASIC in Australia.

To get some honest insights on eToro, it’s worth checking out their latest reviews on Trustpilot. The reviews will provide a good overview of the main complaints clients are experiencing as well as the positives.

Pros

• The minimum deposit is just $200 to get started.
• Beginner friendly, the whole process of placing trades is very simple. Other brokers platforms cater to more advanced traders.
• Offer some access to penny stocks but the selection is limited.

Cons

• The main downside is slow customer service. Expect long delays trying to receive answers as live chat is nearly always full. This is what happens when your customers don’t understand the basics of stock trading.
• Trade executions can be slow which might impact your profits if you’re an active trader. If you’re a buy and hold type investor this isn’t a major concern.
• They charge a $5 withdrawal fee to persuade people from withdrawing money, previously it was $25 which is insane!

eToro Alternatives for Trading Penny Stocks

• Interactive Brokers
• TrazeZero
• Trading 212
• Etrade

Summary

Overall eToro wouldn’t be classified as an ideal broker for penny stocks. Despite this there are some low-priced shares on eToro you can trade but it will be limited. eToro is mainly popular because it’s built for beginners and professional traders will favour brokers with advanced trading platforms. Please leave a comment below about your experience using eToro!

Founded in 1982, E-trade has become one of the most popular brokers for penny stocks and large caps. They have developed a strong reputation as a reliable brokerage, serving 5 million clients worldwide. What sets them apart from competition are their trading platforms, competitive fee’s, educational tools and charting software.

Setting up an Account 

Simply sign up for an account by completing an application form. The application process is relatively straightforward, it shouldn’t take longer than 10 minutes to fill out the necessary details. A huge positive for E-trade is their low account minimum, you can open an account with $0 but need to fund it after 30 days to keep it. $500 is required for a cash account and $2,000 for a margin account.

Penny Stock Commissions (3.8/5)

• Although E-trade is not the cheapest broker, they still offer cheap commissions.
• $6.95 fee per trade is slightly above industry standard but the fee falls to $4.95 if you execute more than 30 trades in a quarter. Numerous online brokerages charge lower commissions but add on extra surcharges which can dramatically increase your commissions. For example, Interactive Brokers have a surcharge of $0.005 per share, 10,000 x 0.005 is an extra $50 fee.
• The flat-fee commission and no surcharges on penny stocks makes them an ideal option for trading low-priced shares. The flat fee means no matter how many shares you purchase, you pay the same price regardless.

Trading Platform (4/5)

• E-trade have two advanced trading platforms – E*TRADE and Power E*TRADE (formerly OptionsHouse).
• Power E*TRADE is an innovative platform ideal for penny stock traders as their tools are relatively easy to use.  They have advanced intraday and historical charting, drawing tools, and market news. The charting tools automatically populate charts with technical analysis.
• E*TRADE was their original platform before they acquired Options House, perfect for beginners who need to research investments, track markets, place trades, and develop their skills.
• Their mobile app also allows you to follow the markets wherever you go!

Customer Service (4/5)

• E-trade has won awards from Smart Money due to their customer service. Some of their customer support is outsourced to foreign countries to reduce expenses which is normal for large corporations.
• Customer service is friendly compared to other brokerages, helpful for beginners.
• 24/7 support available, gives them an edge over competitors.

Pros

• No extra fees for penny stocks and beginner friendly.
• Have excellent borrows for shorting penny stocks.
• Minimum account deposit is $0.
• No inactivity or unnecessary acquaintance fees.

Cons

• No longer accept traders from the UK and Europe. Check their list of accepted countries as from time to time, they change it.
• Quotes are delayed by 15 minutes unless you meet the 30 trades per month requirement.
• Not able to fund your account with a debit or credit card and only support one currency – USD.

If you’re interested in trading penny stocks, E-trade is a great choice! Various experienced day traders such as Timothy Sykes highly recommend them as a broker!

CenterPoint Securities is an online stock broker that caters to sophisticated day traders. They provide clients with direct market access and various routing options for traders looking to gain an edge in the market. The brokerage is a division of Precision Securities LLC, which is a member of FINRA and have been in business since 2000.

Commissions

CenterPoint offers customers three commission plans. The standard plan was created for active day traders; charging between $0.002 and $0.004 per share, depending on total trading volume for the month.

The all-in plan caters more towards institutional clients, with trades costing anywhere from $0.0045 to $0.0065 per share.

Traders who sign up for the per-ticket plan pay between $2.95 to $5.95 per trade. Clients who trade more than four shares million will pay reduced fees per share.

Opening an Account

CenterPoint Securities is tailored towards high net worth investors who can afford to deposit a significant amount of capital. The minimum deposit required to open an account is $30,000! This figure is a lot higher than the industry average. Most brokers now have no account minimum. In recent times Interactive Brokers had a minimum of $10,000 but removed it to attract more customers.

Surprisingly, CenterPoint doesn’t have an online application process. Instead, you have to send the required documents by email in a PDF format. Unlike other well-known brokers, they do accept non-US residents, considering they meet the requirements.

Trading Platforms

Trading Software Fees

Centerpoint has three software tools, each charge a monthly fee – ranging from $120 to $250 per month. The hefty monthly fees can be avoided if you meet the minimum trading volume, this ranges from 300,000 to 1 million shares.

DAS Trader Pro

DAS Trader Pro is the cheapest platform available to customers. The platform provides everything a professional trader needs to make money. It contains an advanced charting tool, fast executions, supports multiple monitors, multiple stop types, real-time level 2 quotes and the latest market news. They also provide data for all the major exchanges including NASDAQ, NYSE, BATS and Direct Edge.

Sterling Trader Pro

Sterling Trader Pro is the second most expensive platform, costing $175 to $235 per month. This is a very sophisticated tool used by experienced traders of options, equities and futures. The platform has real-time level two, basket trading and programmable keys to enable faster trade executions. Programming enthusiasts can leverage the API capabilities to integrate their own software programs. In addition to access to data on all major US exchanges, the software displays data for several foreign stock exchanges – Europe, Brazil, Hong Kong and Shanghai.

RealTick

RealTick is CenterPoints most powerful platform, enabling clients to do everything possible to gain a statistical edge on competition. The pro version is a whopping $505 per month with data feeds included, there is an express version for $205. Both plans offer faster executions, options to optimize trading performance, access to a global broker network and liquidity from dark pools & exchanges. The Pro edition has a mobile app for those wanting to follow the latest stock market news from their mobile phones.

Pros

• One of the best brokers for trading penny stocks, experts such as Timothy Sykes, Michael Goode and Tim Grittani use them as a broker. If these traders are recommending CenterPoint then they must be an excellent broker.
• Another big advantage is quick trade executions, speed is crucial on Wall Street. Other online brokers can’t compete, offering bad fills that could cost you hundreds of dollars.
• Have the best borrows making them the best broker for short selling stocks. CenterPoint works with four clearing firms – ETC Clearing, Hilltop Securities, Wedbush Securities, and Vision Financial Markets. In fact, they have access to 30+ venues for direct routing.

Cons

• The company only wants to work with high net worth individuals. This is understandable from a business perspective but the average person can’t afford $30,000 to open an account. Those new to trading will end up using cheaper brokers with slow executions.
• Expensive fees charged, only receive discounts if you trade with large volume.
• Not suitable for beginners and there are limited educational resources.
• Their stock scanning tool is limited so you will need to find a premium screening tool like Trade Ideas, StocksToTrade and Finviz.

My Final Thoughts

Excellent broker mainly used by professional traders with large account sizes. If you don’t have enough money explore alternative brokers such as Charles Schwab, Interactive Brokers and Fidelity.

Thanks for reading my review of CenterPoint Securities, please let me know your opinion in the comment section!

Robinhood is a stock trading app that is ideal for beginners looking for something that is easy to use and charge no commissions. The smartphone app allows anyone to buy and sell shares for free, in publicly traded companies on U.S. exchanges. Charging no fees is a revolutionary idea within the brokerage industry and has received significant media coverage due to their business model. There has to be a catch; it sounds too good to be true!

Investors should be cautious because no fees means trade executions are slower than the leading brokers. The Silicon Valley start-up founded in April 2013, has 3 million customer accounts and is valued at $11.2 billion based on their latest round of funding. Robinhood currently only accepts people from the United States but have plans to launch in the UK and Australia in a few years. It’s only a matter of time before they expand into new countries.

The company was set up by Baiju Bhatt and Vladimir Tenev, former college students at Stanford University. When they left college, they headed straight to Wall Street to set up their own business, specializing in creating trading platforms for some of the world’s biggest financial institutions. Here they noticed that electronic trading firms and high-frequency traders paid little or nothing to place thousands of trades every day, while retail traders were being charged $10-$20 per trade. They made it their mission to challenge the status quo.

Setting Up an Account

In comparison to other brokerages, it’s easy to set up an account and only takes 10 minutes to fill out your details, and then wait for approval.

To apply for an account, you are required to meet these four requirements:

• Possess a Social Security Number
• Provide proof of legal residential address within the US.
• Be a U.S. citizen over 18 years of age
• Have a mobile device to use the app (currently, they are working on the desktop to cater to everyone)

Once you fill out contact information and validate your SSN, you are allowed to attach your bank account, so you can deposit money to begin trading. On average it takes 1-3 days to get approved, in some cases, it can take up to 5 days if incorrect information is provided. If you’re still not verified after five business days, contact their customer service team to speed up the process.

Pro’s

No Commissions & no account minimum – Zero commission trades is the sole reason why Robinhood is quickly becoming the most popular broker for millennial trades. Brokerage firms such as Etrade and Interactive Brokers charge a fee every time you buy and sell stock; typically they charge $5 -$10 per trade. Over time this can add up and eat into your potential profits.

User Interface – The app’s design and the user interface is very slick. Their easy-to-use interface means it’s simple for novices to place trades. The interface’s theme changes color from light during market hours to dark during when the stock exchange is closed.

Great for Beginners – Ideal for first-time investors who have limited day trading experience and have a small amount of money to invest. Part-time traders can gain a feel for the market in a safe environment and then later upgrade to a broker that offers more advanced features such as level 2, charts and quick executions.

Robinhood Gold – The company recently introduced a premium service to allow members to trade after hours and open a margin account; the margin is limited to protect users from too much downside risk. The gold account costs a minimum of $10 per month; this allows you to borrow 2x times the amount of capital in your account, you need to deposit at least $2,000 to take advantage of this feature. They have a tiered pricing structure, the more buying power you request, the more you will have to deposit and pay. E.g. $4000 for $20/month and $10,000 for $50/month. Leverage is dangerous for novice traders as they can end up owing money to the broker.

Smart Notifications – Alert members to news such – earnings reports, dividends or stock splits, giving you timely information that will help you manage your portfolio.

Con’s

Slow executions – Fast trade executions are the difference between winning and losing trades. Trade executions are not as quick as the larger institutions, so you’re at a disadvantage because you don’t have the opportunity to get in and out of trades at the best possible prices. Hopefully, with Robinhood instant, the gap in speed to competitors will decrease and it now no longer takes 1-3 business days to get access to funds after selling.

Poor customer service – They have 2 million users, and the customer service team is struggling to serve all their customers, they need to invest more into customer support. Their office is tiny; it’s literally a handful of people in a small WeWork space in Santa Clara. Response to emails will be slow and you’ll need patience when calling the customer support team to solve any problems you may have.

Novice traders are blowing up accounts – Robinhood has greatly reduced the barriers to entry, making it faster and easier for anybody to trade stocks. This isn’t necessarily a good thing, 100’s of young, uneducated traders will blow up their accounts and soon realize trading isn’t as easy as it looks. Thousands of millennials lost money investing in the Snapchat IPO that turned out to be a disaster. Snapchat IPO’d at $25 and is now at an all-time low of $11.83.

Limited trading tools – Lack the necessary tools and resources to support day traders. They don’t provide extra features such as charts, stock scanners and level 2 as 90% of users are part-time traders who only place 3-5 trades per week.

No short selling – Robinhood doesn’t allow customers to short sell companies, so you’re unable to capitalize when the price of stocks decline. They hope to offer short selling as an order type in the near future.

Not suitable for penny stock traders – This app is better suited for buying blue chip stocks and ETFs. There is a limited selection of penny stocks on Robinhood; most penny stocks trade on smaller exchanges such as the OTCBB and Pink Sheets. Millennials have a strange obsession with penny stocks on Robinhood, most of them randomly invest in a company under $1 hoping to strike it rich. Luck is not a strategy; you might as well flush your money down the toilet!

PDT rule – By offering free trades. they encourage people to trade more frequently, and they focus much on short-term price movements. Scalping is a waste of time due to high-frequency trading as you will get front-run by algorithms. The pattern day trader rule tends to stop most users from overtrading.

Frequently Asked Questions

How does Robinhood Make Money?

As the saying goes “there’s no such thing as a free lunch.” They make money by collecting interest on deposits within customers’ accounts and through premium services such as Robinhood Gold. So far the startup has raised $176 million, this has given the company a chance to create a  “wonderful brokerage experience” without having to worry too much about short term profits. They should become profitable within the next 1-2 years and will have a significant impact on financial apps soon.

How is Robinhood Similar to a Bank Account?

Bank accounts contain cash deposits, while a Robinhood customer account will contain securities (stocks) and cash. Funds can be transferred to your Robinhood account from your bank account and then can be used to buy and sell shares. All accounts are SIPC insured up to half a million dollars, and there is no account minimum.

Is the Robinhood App Safe?

As they store hundreds of millions, they are vigilant with security because any breaches will destroy their reputation and put them out of business. They are a registered broker-dealer and a member of SIPC and FINRA just like other penny stock brokers such as Etrade and TD Ameritrade etc.

They are more cost efficient than other brokers who have dozens of storefront locations, who use legacy technology and paper-based accounting. As a result of these two factors, they can drastically reduce their costs and will not have to charge customers commissions or any other unnecessary markups.

Robinhood Alternatives

For investors outside of the US, there are some similar apps you can use to buy stocks for free! TradeZero.co is a cheap alternative; they are a brokerage firm operating in the Bahamas. TradeZero gives free limit orders if the order does not create an immediate mate. Since they are based in the Bahamas, you can bypass the PDT rule. Another good option for people in the UK is freetrade.io, they are another commission free broker that launched in 2019. Etrade and Interactive Brokers’ are the best-paid alternatives for those serious about day trading.

In conclusion, it will be interesting to see how their business model will fair out and how the big brokers will react to their rapid expansion.