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Finding A Good Online Broker To Trade Penny Stocks

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What Type of Online Broker To Use To Trade Penny Stocks

Online BrokerIf a penny stock trader wants to be successful with online penny stock trading, finding a good online broker to trade penny stocks is very important,.  Thy type of online broker that is best suited for a particular penny stock trader depends upon how engaged one is in penny stock trading.

While obtaining timely penny stock tips and information is essential to successful penny stock trading, being able to execute penny stock trades in a timely manner via an online broker is just as important.  For casual penny stock traders, well known online brokers, such as Ameritrade, E-Trade, or Fidelity Investments provide adequate online penny stock trading tools and resources.  Penny stock traders that wish to actively trade penny stocks or day trade penny stocks are better served by an online broker that caters to active traders, such as Interactive Brokers or MB Trading.

The Different Types of Online Broker Used To Trade Penny Stocks

To make an informed decision regarding which type of online broker is best suited for a trader’s needs, you need to understand the difference between the well known online brokers that cater to casual traders and the specialized online brokers that provide additional trading features for active traders.

The well known online brokers that casual traders use offer more or less similar trading platforms.  An order is entered online via a website and is then routed through market makers that have business relationships with the online brokers.  This process can result in either a nearly instant order fill at the best market price or a delayed order fill at a price that is competitive but not the best available; it really depends upon the order flow the market makers are dealing with and what orders they have pending that they can match up with the newly placed order.

What sets specialized online brokers that provide additional trading features for active traders apart from the well known online brokers that cater to casual traders is the fact that specialized online brokers allow traders to route orders to the market makers of their choice or to route orders to electronic stock trading networks known as Electronic Communication Networks (ECNs).  This order routing ability often results in faster order execution and better execution prices.  The additional control over order routing can be the difference between a profit and a loss for an active penny stock trader looking to quickly enter and exit penny stock trades.  Of course, specialized online brokers do charge higher fees than well known online brokers, but for active penny stock traders, the additional costs are well worth the additional order execution control.

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