How To Find and Trade Penny Stocks on Schwab

Charles Schwab is a top four stock broker in the United States, and it got even bigger with its recent acquisition of TD Ameritrade. Trader tip — TD Ameritrade’s thinkorswim trading platform is coming to Schwab in 2023, giving traders another reason to use its platform.

Is Schwab a good option for penny stock traders? Learn more about the platform and how to find penny stocks there in this guide!

Can You Buy Penny Stocks on Charles Schwab?

You can buy penny stocks on Charles Schwab. The broker offers shares listed on major stock exchanges and over-the-counter (OTC) markets.

While almost all brokers offer access to penny stocks on major exchanges, not all provide access to OTC stocks. OTC companies specialize in micro-cap stocks which are dirt cheap. Big investors stay away from OTC stocks because they are sketchy and speculative — which makes OTC trading easier for penny stock specialists!

How to Buy and Sell Penny Stocks on Charles Schwab

You have many ways to access Charles Schwab’s trading features. Schwab lets you trade through its website, the desktop trading platform StreetSmart Edge, and its mobile apps Schwab Mobile and StreetSmart Mobile.

Here’s a short guide to penny stock trading on Schwab:

1. Before you trade with Schwab, you’ll have to open a trading account. If you want to short sell, you’ll need a margin account — with a minimum of $2,000 in that account to borrow on margin. To trade options, you’ll have to get account approval first.
2. Enter the security you want to trade and check the stock price.
3. Choose your trading strategy between a straight stock transaction or an options trade.
4. Choose whether to buy or sell the security.
5. Input the number of shares.
6. Pick an order type.
7. Select an order timing.
8. Review your order, then place it.

Who Is Schwab For?

Schwab is a good stockbroker for any kind of trader or investor because it has choices for everyone. You can trade or invest in stocks, mutual funds, and ETFs. More people trust Schwab with their money than any other broker — at over $7 trillion, Schwab has the most assets under management.

However, the only way to know if a broker is a good fit for you is to try it out. Schwab doesn’t require a minimum deposit, so feel free to start an account and test its features. Pay close attention to how the broker executes its trades, and to any service slowdowns or outages you encounter.

No stock broker is perfect, so choose one that gives you the least trouble when trading.

Associated Fees and Service Charges

Like many brokers, Charles Schwab has switched to no-commission on most of its stocks. However, it will charge you for OTC trading. Here’s a quick breakdown of basic trading fees on Schwab:

• $0 service charge for trading listed stocks on major exchanges
• $6.95 service charge for trading OTC stocks

Schwab doesn’t charge monthly service fees and has no minimum investment requirements.

5 Top Penny Stocks to Watch on Schwab

My top penny stocks to watch on Schwab are:

• (NASDAQ: HUDI) — Huadi International Group Co.  — The Low Float Penny Stock
• (OTCQB: NBLD) — Renewable Innovations Inc. — The Reverse Merger Penny Stock Supernova
• (OTCPK: CGRA)  — CGrowth Capital Inc. — The Volatile Penny Stock Runner
• (OTCPK: CLNV) — Clean Vision Corp.  — The Choppy Former Runner Penny Stock
• (OTCPK: CLOW) — Cloudweb Inc.  — The Breakout Penny Stock

Remember: This is a watchlist, not a buy list. I won’t trade these stocks unless they fit my preferred setups.

The best traders watch more than they trade. That’s what I’m trying to model here. Pay attention to the work that goes in, not the picks that come out.

1.  Huadi International Group Co. (NASDAQ: HUDI) — The Low Float Penny Stock

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My first Schwab penny stock pick is Huadi International Group Co. (NASDAQ: HUDI).

Exhibit A for why watchlists matter — HUDI’s 500%, two-day spike in early November.

It ran from the mid-$20s to the low $190s on news that HUDI was getting into the clean energy business. The spike took many traders by surprise — especially short sellers.

Ooooooooo $HUDI turning into $ILAG $HKD part 2, how many short sellers are in need of a followup lesson?!

— Timothy Sykes (@timothysykes) November 3, 2022

I didn’t trade it then, but I wasn’t surprised. HUDI had already shown it could run on minimal volume when it popped 125% in late October. Just like in November, it gave its gains back in short order.

It had all of the marks I want you to look for in the penny stocks you put on your watchlists:

• Low float — it had a float of 3 million shares
• Former runner
• Responds well to news
• Hot sector — before it was in clean energy, it was part of the oil and gas sector

The news that led to its big run came my way through StocksToTrade’s Breaking News Chat add-on. If you don’t have an alerts service like Breaking News, it’s like you’re trading blind.

That news led to the last piece in the puzzle, the volume that sent its shorts running for cover!

It’s since added a million shares to its float, causing the rally to fizzle. But big picture — this stock is on traders’ minds, and even post-dilution its 4 million share float and penny stock pricing is a recipe for a future run.

2. Renewable Innovations Inc. (OTCQB: NBLD) — The Reverse Merger Penny Stock Supernova

My second Schwab penny stock pick is Renewable Innovations Inc. (OTCQB: NBLD).

Here’s another clean energy pivot. This one was worth 4,600% in its 2-day run, as NBLD completed a reverse merger into a renewable energy company.

NBLD started December as an $0.08 real estate digital media stock… Now it’s stabilized in the low $1s.

I’m proud of my early trades here — then again, I had the kind of support that leads to 80% bounces! The volume slowly receded over the following days, leading to several failed bounces and cutting my earnings down to $621 overall.

Just like HUDI, this stock seems to have flatlined. And just like HUDI, this stock can run again. It has a 6 million share float, and has shown it can run on minimal volume. Imagine when it gets actual news…

The problem with most watchlists is that people treat them like predictions. That isn’t what you’re getting with this watchlist. What you get here is my 20 years of experience looking at the causes of penny stocks runs. That’s what tells me NBLD has the right pieces in place.

3. CGrowth Capital Inc. (OTCPK: CGRA) — The Volatile Penny Stock Runner

My third Schwab penny stock pick is CGrowth Capital Inc. (OTCPK: CGRA).

Since late November, CGRA has been teasing some upcoming moves. I’ve been trading on all the misplaced enthusiasm that comes with these rumors.

The first pump came on November 29, talking about an upcoming change of control. Since then, the stock has gained about 700%… and it’s lost a fair bit too.

But what I’m excited about with this stock aren’t the two new businesses it’s soon to announce. It’s the identity of the incoming CEO, Nick Link.

Nick Link is also CEO of Ilustrato Pictures International Inc. (OTCPK: ILUS), a name that should be very familiar to you if you trade penny stocks.

ILUS sure is familiar to me — I’ve made $15,000 trading this crappy penny stock. ILUS is one of the most heavily-promoted penny stocks out there, and I’m expecting the same from CGRA.

So far CGRA hasn’t disappointed. I’ve made $1,363 trading this volatile stock and I still don’t know what it does…

I don’t expect its actions to talk louder than its words. My guess is that there’s some news ahead — and it won’t exactly be subtle.

4. Clean Vision Corp. (OTCPK: CLNV) — The Choppy Former Runner Penny Stock

My fourth Schwab penny stock pick is Clean Vision Corp. (OTCPK: CLNV).

Let me share with you the reason why I never “believe” in a stock. Believing in a stock almost always leads to falling on my face.

After CLNV spiked in November, I tried to dip buy it. Each time I came in too early. It ended up dropping 35% in the first hour of trading November 30… and I ended up with three losses that added up to more than $4,500!

These were silly losses. But it doesn’t mean I was wrong. From 10:30 a.m. to noon Eastern, the stock recovered 25%.

The problem was — I knew what this stock could do too well.

WOW, $CLNV wheeeeeeeeeeew, what a first https://t.co/xMdUiD9ZbL play, now a 67% winner from last week and despite my making $6k+ I exited wayyyyyyyyy too soon, now everyone sees the potential, big congrats to those with patience! Who wants a video lesson on this one?

— Timothy Sykes (@timothysykes) September 7, 2021

In September 2021, I traded CLNV for a gain of $6,476 (starting stake $23,712).

This March, I traded it for almost $5,000.

Former runners can run again, and I want to be watching when they do.

5. Cloudweb Inc. (OTCPK: CLOW) — The Stair Stepper Breakout Penny Stock

My fifth Schwab penny stock pick is Cloudweb Inc. (OTCPK: CLOW).

CLOW’s 500% run was one of the stories of November. Halfway into the month, its 60% run — at a higher price point — is one of the stories of December.

It’s got this won’t-quit stair stepper pattern — straight out of my Pennystocking Framework Part Deux DVD. It looked unstoppable enough that my former student, $10 million trader Jack Kellogg, swung a trade for 10 days. He made over $11,000 (starting stake $9,120).

REPEAT AFTER ME: I will focus on multi month runners like $GDVM $CLOW because they are SO MUCH EASIER/MORE PREDICTABLE. I promise to learn the https://t.co/4lKUY5B6aw & https://t.co/46W8tDB2QL patterns

— Timothy Sykes (@timothysykes) December 7, 2022

I’ve been more conservative in trading this stock. I made $3,167 mostly on panic dip buys.

The small volume that CLOW trades most days scares me. You don’t want to be stuck in an illiquid penny stock — that’s a recipe for BIG LOSSES. Just look at that 65% morning panic CLOW had on December 1.

But this stock just won’t die. I’m watching it for the next time volume comes in.

Benefits of Using Charles Schwab

Is Charles Schwab good? Investor’s Business Daily sure thinks so: Schwab ranked third overall on IBD’s 2021 survey, with a customer experience index of 65%.

Here are some advantages of choosing Charles Schwab as your broker:

Strong Website Security and Performance

Charles Schwab took second place in the website security and performance categories. This means penny stock investors and traders will have a smooth browsing experience and not have to worry about data theft.

Great Trade Execution

Schwab earned second place in trade execution satisfaction thanks to its Schwab Order Execution Advantage. It claims to help you save an average of $17.05 per order, and fills orders within 0.04 seconds.

Professional, Personalized Service

Like getting personalized service? Schwab Personalized Indexing provides a separate, professionally managed account to fit your stock preference.

Robust Research Tools

Schwab’s research tools are top notch. You can screen stocks according to over 100 criteria, and read the opinions of Schwab’s in-house experts on around 3,000 stocks.

In 2023, it will start offering stock screening platform thinkorswim, which gives Schwab users another powerful tool at their disposal.

Helpful Customer Support

Schwab earned second place in IBD’s customer service rankings — it will respond to your inquiries quickly. Schwab also provides helpful FAQs to assist traders in learning the ins and outs of its platform.

Potential Drawbacks

All brokers have drawbacks, and Schwab is no exception. Here’s what I find limiting when trading with Schwab:

Higher Margin Rates

When you use margin trading, your broker lends you money to finance a bigger position than you pay for. Just like a loan, low margin rates are preferable.

Unfortunately, Schwab has relatively high margin rates. For traders under the PDT, the rate is 12.075%.

Dated Trading Platform

A strong trading platform is important for stock brokers. Unfortunately, Schwab’s trading platform is somewhat outdated, so you may not get the most up-to-date trading experience.

On a personal note, I use StocksToTrade as my trading platform. I think that it’s the best trading platform out there — which makes sense, as I helped design it. Schwab doesn’t work with StocksToTrade, which makes monitoring my watchlists harder.

Not a Good Broker for Shorting

Even though I don’t recommend shorting for newer traders, it has its place in penny stock strategy. Schwab isn’t the broker I’d recommend for finding hard-to-borrow stocks or its margin rate.

My two short sales of 2022 both used TradeZero. In my short of Global Tech Industries Group Inc. (OTCQB: GTII), which made me $1,081 (starting stake $8,700), TradeZero was the only broker which had shares.

Shorting is dangerous — especially with penny stock supernovas like GTII. But I never want to limit my trading possibilities, especially when a penny stock is following my 7-step framework so well.

Check out TradeZero yourself — I’ll give you a free gift if you sign up!

Are Penny Stocks Good to Trade?

Penny stocks have definitely been good to trade for me! As of now, I’ve made over $7.4 million trading penny stocks. Trading penny stocks is a great way to build your trading account… but on the other hand, it’s an easy way to lose money if you trade without a plan.

How to Find Penny Stocks to Buy

My favorite way of finding penny stocks to buy is to use a stock screener. A good screener will be the link between your watchlists and actual trades.

There is a wide variety of screener platforms, but I use StocksToTrade. It’s got all the tools I need to find high-potential trades, from its Breaking News Chat add-on to its badass charts.

This is important: never blindly copy any “best” penny stock list — even mine. Do your due diligence and research before trading.

If you want to try the lethal StocksToTrade + Breaking News Chat combo, grab it here — only $17 for 2 weeks!

What to Look For in Penny Stocks

Before every trade, I look for unusual trading volume and news catalysts about the companies in my penny stock watchlist.

For my watchlists, I generally choose low-float stocks — stocks with a limited supply of publicly available shares. The limited supply can lead to big price swings when demand increases.

My penny stock watchlists also include former runners. Former runners often run again.

Tips for Beginner Traders With Charles Schwab

The most important piece of advice I can give to beginner traders is: do your research!

Know your stock broker and understand how it works. Your stock broker is the most important tool for trading, so make sure you don’t make the wrong choice when choosing Charles Schwab or any other broker.

Other Trading Platforms

There’s really no “right choice” of broker platforms, so just choose whichever one works best for you. Personally, I use a combination of E-Trade and Interactive Brokers. E-Trade’s good for going long, while Interactive Brokers works for shorting and trading stocks from foreign companies.

I’ve also done a “reset” with the up-and-coming broker TradeZero. I’m going back to basics — I have just $12,000 in my trading account, the same amount I started with as a brand-new trader. I’m excited about TradeZero because it has competitive pricing, great trading tools for both listed and OTC stocks, and crypto support.

Choosing the Right Trading Platform for Your Trading Strategy

Your online trading platform choice is just as important as your broker. I use StocksToTrade because it fits my trading style. However, Schwab’s suite of programs are perfectly fine as long as they work for you.

Neither work for you? Keep trying until you find the right fit.

Have you tried trading penny stocks on Schwab? Share your experience with me in the comments!

Penny Stocks on Schwab FAQs

Can you buy OTC stocks on Charles Schwab?

Yes, you can buy OTC stocks on Charles Schwab. The platform offers about 10,000 OTC securities from a wide array of companies.

Does Schwab charge a fee for OTC trading?

Schwab charges a fee of $6.95 per transaction for OTC trading.

How long should you hold penny stocks?

I don’t recommend “hold and hope” when it comes to penny stocks — that’s how 90% of traders lose. Make a trading plan with reasonable goals and tight risk tolerance, then follow your plan strictly to small gains or even smaller losses.