Penny Stock Brokers: Trading Penny Stocks with E*Trade

E*Trade is a penny stock broker.  They have certain special rules that apply to trading penny stocks due to the volatile nature of these securities.  Obviously they’re not for the faint of heart and you would never dump your life savings into something trading for less than a dollar.  Unless, of course, you got a great tip from your brother-in-law, who happens to have a friend at a small mining company that is on the verge of finding the next rare-earth mine.  I digress.

Back to whether or not you are going to go with E*Trade as a penny stock broker.  Generally you can trade penny stocks on your own through your normal E*Trade account.  There are a few caveats. Because penny stocks are thinly traded, there is no guarantee that you will pay the price you see online.  They do not guarantee accuracy or price with these securities.  It could be more or less.  That’s all part of the fun of penny stocks.  Furthermore, if the security is too thinly traded, you may need to make a broker assisted trade, which normally costs an additional $45.  It might not be a bad idea to go with this route, especially if it is thinly traded.

A few other pieces of information:

No short sales,

No stop orders, and

No market orders on stocks trading under a dollar (generally speaking).  Limit orders only.

I found some conflicting information on their website regarding the fees for broker assisted trades.  I will contact the company and get further clarification, however, they have the following noted in their FAQ:

“OTCBB/Pink Sheets trades do not accept fractions less than 1/16ths. Although many Pink Sheets trade in decimals, the system does not accept the entry of a decimal on many securities. Therefore, it is often necessary to utilize a broker to place the trade at no additional fee.”

It’s not clear that you will always have no additional fee on a penny stock broker assisted trade or just for the securities for which the system does not accept the entry of a decimal.

Other than that, E*Trade’s normal rules and fees apply.

Good luck with that mining stock.