Best Broker for Day Trading Penny Stocks

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Day trading any asset, especially penny stocks, is not for the faint of heart. Penny stocks are seldom talked about by the main stream financial media, in part because the ultra low-priced stocks have small market capitalizations and aren’t too well known.

With that said, penny stocks offer up a different level of trading opportunity. Volatile penny stocks can trade up 300% in a single day, whereas big-name companies like Apple and Microsoft are almost guaranteed to never triple overnight.

So if you have an iron stomach and want to get in on the penny stock action, or you already know about penny stocks and want to improve your trading, you’ll need to pick a broker that’s penny stock friendly.

So what’s best broker for day trading penny stocks? As of July 2018, here’s our list:

Ally Invest   – 5 stars


2 TradeStation   – 4 stars


3 SpeedTrader  – 3.5 stars


4 SureTrader   – 3 stars


Even for regular stock trading, we like Ally Invest due to their well-built online trading platform and ultra-low fees. For penny stocks, they’re pretty great, too.

In our full Ally Invest review, we noted how if you trade more than 30 times in one quarter, it only costs $3.95 per trade instead of $4.95 – not bad for a broker that also offers 24/7 customer service.

Runner up for day trading penny stocks is tastyworks. Although they have an account minimum of $2,500, there is no minimum to maintain an account, and their fee of only $5.00 per stock, with free closing trades, is pretty compelling.

Penny Stock Day Trading Broker Info

Broker

Stock Trade fee

Account minimum

Ally Invest 

$3.95-$4.95

None

TradeStation 

$5.00

$2,500 (nothing to maintain)

SpeedTrader 

$1.00

$25,000 (must maintain)

SureTrader 

$4.95

$2,500 & NO U.S. Citizens

Stock Brokers that Permit Penny Stock Day Trading

One of the most important things to note about day trading stocks, regardless if they are penny stocks or not, is that FINRA says if you make four or more day trades in five business days, you will be classified as a “pattern day trader.”

When you are classified as a pattern day trader by FINRA, the Financial Industry Regulatory Authority, you will be required to maintain a minimum account balance of $25,000 at all times. If you fall below $25k, your broker will issue a pattern day trader margin call to bring your account balance back up to $25k.

You’ll have five days to meet the margin call, and if you don’t, you can be restricted from margin trading for 90 days. Most brokers give their clients a few warnings if they execute four or more day trades in a five day period. However, you shouldn’t bank on being let off the hook.

History of the Pattern Day Trader Rule

The US Government and FINRA implemented the PDT rule on February 27, 2001, in the wake of the dot-com bubble. Back then, day trading was all the rage.

Average Joes were making so much money from day trading stocks, like using lots of leverage to buy buzzing stocks in the morning and then sell them before the market closed, that lots of people actually quit their jobs to trade the markets full-time.

As you could probably imagine, having a lot of relatively unsophisticated and novice market participants quit their jobs to day trade stocks didn’t end particularly well.

The Dot-com bubble eventually burst, and tons of traders lost all of their money. Since then, FINRA and the SEC decided it would be a good idea to implement a rule that stipulates for anyone that wants to day trade stocks, they must have at least $25,000.

The idea behind this is to potentially eliminate the smaller investors with less than $25,000 to invest, who perhaps only have $1,000. FINRA thinks that if you have at least $25,000 to invest, chances are you have some money that you can afford to lose.

How to Get Around the Pattern Day Trader Rule

One of the easiest ways to circumvent the PDT rule is by having multiple brokerage accounts. For example, if you open up an account with Ally Invest, tastyworks, Firstrade, and TD Ameritrade, you can make up to 12 day trades every week. That’s more than 2 per day on average, and this should be plenty.

SureTrader, since it’s based in the Bahamas, used to be one of the classic ways that day traders could avoid the stupid PDT rule, but it is no longer a viable method for US residents. It’s still a decent choice for international traders, but watch out for weird account fees and so-so customer service.

SpeedTrader is a solid choice for day trading, especially penny stocks, but they require a minimum of $30,000. Although this means you won’t have to worry about the PDT rule, we this this is a large barrier to entry.

Since it is based in the Bahamas, SureTrader doesn’t have to follow the FINRA PDT rule, as it only applies to brokerages operating and domiciled in the United States. The SEC, of course, caught on to SureTrader and now they no longer accept US clients and they will block your IP address. They take clients from just about every other country, though, including Canada.

To sum it up, if you are based in the US and have less than $25,000 and want to day trade, your best bet is to open up multiple brokerage accounts with with penny stock friendly brokers like Ally Invest, tastyworks, and TD Ameritrade,

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