Penny Stock Brokers: Picking one to keep from going.....broke!

How do you find the best of
the penny stock brokers?

Bad penny stock brokers will only result in one thing: you being "broker"

than them! That's why it is so important to learn how to choose a good one. When you begin searching for a broker the first step is determining the service level you require. This will immediately narrow your search to one of two main categories of brokers: full-service brokers and discount brokers.

A full-service broker provides a variety of services to their clients in addition to entering trade orders. These services can include stock research, trading advice, retirement planning, tax tips, and more. Of course, this comes at a price, as full service brokers are more expensive than discount brokers.

If the funds are available, a full service broker can help a novice penny stock investor who is still learning how to trade or those who need a little guidance. You can always graduate into trading through a discount broker as you gain more experience in penny stock trading.

Discount brokers offer much lower commission rates on trades because of their limited client services. They neither guide their clients in penny stock trading nor advise them on the next smart move.

Should you go with a discount broker?

Investors who have the experience and confidence of making penny stock trades will find the ease of trading that discount brokers offer ideal. On the other hand, beginning penny stock investors should be wary of signing on with a discount broker just because of their low price. Saving a few dollars on fees may not offset large trading losses.

After you’ve determined the level of service you need, the next step is to review a list of penny stock brokers and select some to research. We suggest reviewing penny stocks report or broker survey.

Once you’ve got a short list of brokers, now begin to find out as much as possible about them. All brokers must be licensed by the National Association of Securities Dealers (NASD), which makes it an excellent place to start your research. The North American Securities Administrators Association offers links to individual state regulators. Be sure to check if there have been any complaints made against the firm.

Before deciding on a penny stock broker, be sure to read their terms of service and/or membership agreement. Here you will find the broker’s minimum trading account deposit and specific rules and regulations concerning maintenance and margin minimums. The agreements are legally binding and the financial ramifications for not understanding how margin accounts are handled for example, can be substantial.

Since you (hopefully) will always have at least some money in your penny stock trading account, another area to check out is the amount of interest that money will earn. Not all brokers offer an interest rate for the money in your account.

Lastly, look for sign-up bonuses. While this should never be the reason you sign up with a firm, it can be used as a tie breaker.

Overall, finding success in the market begins with choosing the right broker, so make sure you know up front what your needs are. Then, when you are researching, you can make sure the penny stock broker meets them.

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