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.
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.
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.
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.