Before you can start trading penny stocks you need to open up an account at a broker that allows penny stock trading. Most of the popular brokers are not interested in small accounts and will usually not let their clients trade penny stocks due to the high risk involved. In fact usually put restrictions or increase the fees if you plan to buy a microcap stock. It can be incredibly frustrating to open a new account and then find out that you are unable to trade.

Most stock brokers will not let you add stocks that are less than a dollar into your account. This is because there may be high fees associated with that stock that are passed onto the broker. Then those charges are passed on to you in the form of a fee. For example, they will add an addition fee or .002 per share that you purchase. This means that if you buy 1,000,000 shares of a stock that costs .0012 it would cost $1200.00 plus the commission of $2000! With fees like that, no one in their right mind would even consider placing that order. A microcap stock can usually be bought through an online trading account. Another part term you might here is subber, which means a stock under $.01.

There are only a handful of brokers that will actually let you trade these stocks. I’ve tried numerous brokers and have accounts set up at most of them. I’ve found Etrade, Ameritrade, Zecco and Scottrade to be the best. Some people are promoting ChoiceTrade and Fidelty but they really have limited options. One thing to note is that Etrade and Ameritrade have better tools, but Scottrade and Zecco have cheaper trades. You certainly do get what you pay for. You might decide to use Etrade’s tools, but route your orders through Zecco.

Thankfully you are not limited to having only one account. In fact, I strongly recommend having more than one account. Each broker has their advantages and disadvantages. Etrade and Ameritrade will route your orders faster than most brokers so you are more like to get filled or get your sell. Sometimes orders routed through Zecco will get held and won’t be printed until the market maker decides what it wants to do. Market makers are usually automated.

Another reason to have more than one broker is in the event of an emergency. For example, if funds are not cleared or available for trading. Some accounts will also accept wire transfers to make funds available faster. Sometimes brokers have glitches in the system and do not show all of your marginable positions. You want to be able to place a trade if there is a profitable opportunity.

Most of the penny stock brokers will have other services included. This sometimes includes trading software for advanced charting, news reports and live quotes. You will find that many places have quotes delayed by up to twenty minutes. It is impossible to trade on a twenty minute delay. Your broker may also have a level two subscription available.