How to buy penny stocks on Robinhood

Can I buy penny stocks on Robinhood?

Yes, but the platform only offers access to exchange-listed penny stocks. These are stocks listed on publicly traded exchanges like the NASDAQ and NYSE.

To be listed on these exchanges, stocks must meet that exchange’s listing requirements and pay both entry and annual listing fees. Requirements vary by exchange but typically include minimum stockholder equity amounts, minimum share prices and minimum shareholder counts.

Robinhood doesn’t offer access to over-the-counter (OTC) penny stocks.

How to find the top-moving penny stocks on Robinhood

To browse penny stocks, log in to Robinhood on a computer using the web browser. You can’t browse penny stocks in the app or on mobile.

Once you’re logged in on your desktop:

1. Under Popular collections, select Show more.
2. Select the sector or category you’d like to explore and click to see all stocks.
3. On the right side of your screen, drag the price cap button to set the maximum stock price at $5.

Taking these steps limits the available stocks you see to Robinhood’s penny stock offerings. From here, you can sort the available stocks using Robinhood’s stock filters along the top of the screen. Organize by price, movement, market cap, popularity and analyst ratings.

Watch our short video that takes you step-by-step through the process:

How to buy penny stocks on Robinhood

Ready to submit an order? Here’s how:

1. Fund your account. Link your Robinhood account to an external bank account and transfer up to $50,000 a business day, and access to up to $1,000 instantly. Robinhood suggests transferring funds before making a purchase.
2. Pick a stock. Use Robinhood’s search tools to navigate available penny stocks.
3. Select your order type. Indicate whether you’d like to execute a market, limit, stop loss or stop-limit order on your purchase.
4. Indicate the number of shares. Enter the number of shares you want to purchase.
5. Review your order. Take a look at the details of your order and make sure all the information is correct.
6. Submit. Confirm your purchase by swiping up on mobile or clicking Buy on the desktop platform.

Can I day trade penny stocks on Robinhood?

Yes, it’s possible to day trade penny stocks on Robinhood. But Robinhood Instant and Gold account holders can only execute up to three day trades in a five trading day period.

A day trade is any security that is bought and sold on the same trading day. But day trading is a highly risky trading method. To execute a profitable day trade, you must be able to competently wield numerous trading strategies alongside a robust understanding of the market you plan to trade in.

Even with all the right tools at their disposal, day traders often face sizable losses. And Robinhood isn’t well-equipped to cater to this style of trading. It lacks the advanced charting and analysis tools of several of its competitors, including Webull and Tastyworks. Without advanced charting tools and indicators, day trading penny stocks on Robinhood could lead to uninformed trades that result in crippling losses.

The Pattern Day Trading rule

The Pattern Day Trading rule is set by FINRA and governed by the Securities and Exchange Commission (SEC), and applies to all US brokerages. It limits day trades to three day trades within a five trading day period for anyone with less than $25,000 in their account. For Robinhood traders, this rule applies to Instant and Gold account holders with less than $25,000 of equity in their account at the end of the previous trading day. Robinhood states that this restriction helps protect its investors from taking on too much risk — especially new investors with limited equity.

If you place more than three day trades within a five-day trading period, Robinhood marks you as a Pattern Day Trader (PDT) and you can’t place any day trades for 90 days unless you bring your account equity above $25,000. This rule may frustrate some traders, but is there to protect traders from the substantial risks involved in day trading.

Keep track of how many day trades you’ve made in five days by scrolling down to the Day Trades section from the Investing page of your account.

If you’d like to day trade on Robinhood, there are a couple ways around the platform’s pattern day trading rule:

• Hold a Robinhood Cash account.
• Have at least $25,000 in equity in your Instant or Gold account at the end of the previous trading day.

Can I day trade if I downgrade to a Cash account?

Yes, you can day trade by downgrading your Robinhood Instant or Gold account to a Cash account. That’s because Robinhood doesn’t impose the same pattern day trading restrictions on Cash account holders.

Those new to Robinhood automatically start with a Robinhood Instant account — a margin account with instant deposit support and extended-hours trading. The primary difference between Cash and Instant accounts is that Cash accounts don’t support instant deposit or settlements.

You can downgrade to a Cash account at any time. If you hold a Robinhood Gold account, downgrade to a Robinhood Instant account by taking the following steps:

1. From the Robinhood mobile app, tap Account in the bottom right corner of the screen.
2. Tap the three bars in the top right corner of the screen.
3. Tap Settings.
4. Tap Robinhood Gold.
5. Tap Downgrade from Gold.

To downgrade from an Instant account to a Cash account, email the Robinhood customer support team and request the change.

Read our full review of Robinhood

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Bottom line

While it’s possible to buy and sell penny stocks on Robinhood, the platform only offers access to exchange-traded stocks. And the platform’s pattern day trading rule may limit the number of trades you can execute.

Review your investment options on other trading platforms to find the account that best supports your investment goals.

Frequently asked questions

• Is it hard to sell penny stocks?

  It can be. According to the SEC, penny stocks are volatile and illiquid, meaning they may trade infrequently and be difficult to sell.

• What are OTC penny stocks?

  Over-the-counter (OTC) penny stocks are stocks sold through the electronic OTC Bulletin Board (OTCBB) instead of through a publicly traded exchange like the NASDAQ or NYSE.