Penny shares are shares of companies that trade the same as any other share, except the value of penny share is significantly lower, usually below $/£5. While investing in penny shares is considered a risky type of investment, some investors and traders take advantage of the benefits of trading penny shares and generate significant profits. But how do you know which penny shares are the best to invest in?
In this guide, we will cover everything you need to know about the best penny shares to buy in the UK. We will list the top UK brokers that offer penny shares trading and include a step by step guide on how to start trading penny shares.
Table of Contents
How to Buy Penny Shares in 3 Quick Steps
Step 1: Find a UK broker
Choose a top UK stockbroker that provides access to penny shares, such as eToro.
Step 2: Fund Your Account
Fund your trading account using a debit/credit card, bank transfer, or e-wallet like PayPal.
Step 3: Buy UK penny shares
Select your chosen share and how much you want to invest, then confirm the order.
75% of retail investors lose money when trading CFDs with this provider.
Where to Buy the Best Penny Shares in the UK
If you’re a newbie in the trading world, knowing how to buy shares in the easiest and most cost-effective way can be a challenge. Essentially, you can buy penny shares online in the UK from any brokerage firm and even via your bank account (if you have the authorization to buy and sell securities). In fact, this is the most common way to get access to penny shares – through a brokerage firm that connects you to the London Stock Exchange and the AIM market.
But there is another way to buy penny shares online in the UK – through Contract For Difference (CFDs). Originally, CFDs were invented and developed in the early 1990s in London as derivative securities and since then became quite popular around the world. In simple terms, when you buy CFD contracts on a certain asset, you simply speculate on the price of the asset but you do not own the underlying asset.
For that reason, it is a perfect tool for day traders, or for investors who do not have any need to hold a security and receive dividends. As penny shares typically do not pay dividends, it’s advisable that you buy and sell AIM penny shares in the UK with a CFD regulated broker.
To help you get started, below you will find the best stock brokers for buying and selling penny shares in the UK:
1. eToro - Buy Penny Shares with 0% Commission
eToro is our number one pick when it comes to the best trading platform to buy and trade penny sahres in the UK for several reasons. First, eToro offers users to buy and sell shares directly from exchanges or via the CFD market. This means you can always switch between the two methods and choose to trade with up to 1:5 leverage.
While you will get access to shares listed on the London Stock Exchange if you choose trading through their share dealing system, eToro also offers a selection of more than 800 CFD shares from 17 different stock exchanges including the British stock exchange. If you dig around on the eToro platform, you will find a huge range of the best penny shares to buy now from different exchanges.
eToro is a different from any other platform in the market. This broker has developed a social network for trading with more than 11 million registered members on its platform. Consequently, users can interact with each other and even copy the portfolios of other traders by using the CopyTrader feature!
eToro is also heavily regulated by CySEC, FCA, and ASIC and operates in more than 140 countries worldwide. Regardless of the trading method you choose, this broker offers 100% commission-free share dealing, and the spreads for CFD trading are very competitive. To top it off, eToro offers one of the best trading apps on the market.
- A wide range of more than 800 stocks from 17 different stock exchanges
- Enables you to copy trades of other top-performing traders
- Trade both physical penny shares and CFDs
- 0% commission
- eToro charges withdrawal and inactivity fees
2. Plus500 - Trade Penny Share CFDs with Tight Spreads
Although Plus500 only offers a single trading platform, this broker is ideal for investors that are looking for a huge selection of shares CFDs. Plus500 allows investors and traders to trade shares from major popular exchanges with leverage of up to 1:5 and very competitive spreads. Best of all, there’s no commission to pay!
This makes Plus500 an ideal platform for beginners that want to trade penny shares through an intuitive and easy-to-use trading platform. Even though the Plus500 platform is not advanced when compared to other trading platforms in the market, it is extremely easy to use and you can manage your entire trading account from your mobile phone due to the successful Plus500 mobile trading app.
Investors at the Plus500 platform get access to an extensive range of shares from the UK and other popular markets. However, you’ll have to make your own research to find attractive penny shares on the Plus500 platform. While Plus500 does not offer many penny shares in the UK, it does offer penny shares on other exchanges worldwide. Plus500 is also highly regulated as it holds licenses from the ASIC and the FCA. Further, Plus500 itself is a traded company on the London Stock Exchange under the ticker symbol PLUS.
- User-friendly trading platform
- No commission and tight spreads
- Extensive range of shares
- No advanced trading platform
3. Capital.com - CFD Broker with Exotic Penny Shares
Capital.com is a regulated CFD broker that offers a huge range of assets including more than 2000 shares from various exchanges. This broker has developed a unique and innovative trading platform that detects trading insights for users by using an Artificial Intelligence technology.
What makes Capital.com an excellent platform is the design of the site and platform and the resources the company provides. For instance, the navigation to find penny shares on the Capital.com platform is very useful. As we mentioned, this broker offers over 1700 shares, including some of the most interesting penny shares in the market. Those include Norwegian Air Shuttle (NASo), Kongsberg Automotive (KOA), Oasis Petroleum (OAS), and many more.
The minimum deposit is also quite low starting from 20 EUR, 20 USD, 20 GBP, or 80 PLN. If you decide to trade penny shares with Capital.com, you will get a leverage ratio on shares of 1:5, and zero-commission on trades with tight spreads. Capital.com has loads of educational resources, which are helpful if you’re learning how to invest in shares.
- AI trading platform
- Offers over 1700 shares
- Low minimum deposit requirement
- Only supports CFD trading
4. IG - Buy and Trade Over 17,000 International Shares
Much like eToro, IG Markets is one of the few brokers that enables users to trade on UK penny shares directly on the AIM market or through the CFD market. With IG, investors can buy and sell more than 17,000 international shares, including the grey market and IPOs. The fact that IG allows you to trade IPOs is a great advantage for buying penny shares and is one of the most well-known investing strategies among penny shares investors.
On the IG investment platform, investors not only get access to the most popular shares in the UK and worldwide but also to the majority of UK penny shares. These include Byotrol, Sareum Holdings, Mobile Streams, and more. Further, you can trade penny shares through IG’s spread betting account that is tax-free.
IG was founded in 1974, and as of 2020, serves more than 178,000 clients worldwide. It is also regulated by top-tier regulators including but not limited to the Financial Conduct Authority (FCA) in the United Kingdom, so you can be sure its safe. IG charges a commission of £3 per trade for UK shares if you made three or more trades in the previous month, and £8 per trade if you made two or less.
- More than 17,000 international shares available on the platform
- Enables users to buy penny shares directly form exchanges or through CFDs
- Allows you to speculate on a company’s market cap before its IPO
- Share dealing commissions
What are Penny Shares?
Penny shares are known as low-priced shares that typically trade below £1 and have a market capitalization of less than £100 million. But while the unofficial definition of penny share is a common stock valued at less than one British pound, some also include shares with a worth of between £1-£5 as penny shares. The UK does not have a formal definition for penny shares, but according to the Securities Exchange Commission (SEC), the definition of a penny stock is any stock of a company that trades below $5 per share. Some of penny shares may even be traded at less than one cent per share.
Penny shares usually trade on the Over-The-Counter (OTC) market and are also called OTC shares, micro-cap shares, nano-cap shares, small-cap shares. The OTC market, also known as off-exchange trading, is the exchange of shares between two parties, without the supervision and regulation of an exchange. Companies usually list UK penny shares on smaller exchanges such as the Alternative Investment Market (AIM) in the UK, which is a sub-market of the London Stock Exchange.
As penny shares are often smaller businesses in the early stages of growth and have less liquidity than larger companies, they considered being a more speculative investment than larger companies. UK Penny shares also do not have to meet listing or regulators’ requirements to get a stock symbol and to be listed on an exchange.
These companies that issue penny shares often can be found in newer industries that are constantly emerging. The lack of information and the legal, but shady investment practices of penny shares’ companies significantly increases the risk of this type of investment, but while penny shares are risky and often highly speculative, they can give huge returns. Evidently, a large number of well-known blue-chip companies have traded, at some point, as penny shares.
Why Invest in Penny Shares?
Penny shares are considered high-reward, high-risk assets, meaning these are highly speculative securities that can make huge price swings for both directions. When investors buy penny shares, they can simply buy a relatively large number of shares and therefore can make high returns on their investment. For example, if you decide to invest in a $1 penny share and you buy 10,000 shares, you will get $100 for each cent. Moreover, if you decide to trade with a CFD broker such as eToro, you can buy and sell UK penny shares with a leverage ratio, meaning you can invest a smaller amount and leverage your position.
Simply put, there are many advantages of buying penny shares – the low cost, availability, and potentially high returns. Though there is a risk involved with investing in penny shares, many investors understand the high potential of these assets, whether for a long term investment or for day trading.
The 10 Best Penny Shares to Buy Now in the UK
To make things easier for you, we have listed the the best penny shares to buy now in the UK.
Origin Enterprises Plc (LON: OGN)
Origin Enterprises plc is an Agri-Services group providing on-farm agronomy services, digital agricultural services, and crop technologies and inputs. The Group operates in Ireland, the United Kingdom, Belgium, Brazil, Poland, Romania, and Ukraine.
Apart from being the largest penny share company in the UK in terms of market capitalization it is also one of the most highly traded penny shares in the UK. As a company with high coverage by trading experts and analysts, it is more than possible that the company is trading at a relatively cheap price. Further, Origin Enterprises Plc is one of the few penny share companies that pay dividends to its shareholders.
At this phase, the company is in financial trouble and it must review its business plan and operation, but it has significantly higher revenues compared to any other penny share company in the UK, which it’s why one of the best penny shares to buy now.
- Price: £2.97
- YTD Return: -23.97
- 1 Year Return: 42.71
- Market Cap: £332.91m
Deltex Medical Group Plc (LONN: DEMG)
Deltex Medical Group is a medical technology company based in the UK that manufactures and produces blood monitoring and fluid management equipment for use in surgical operations. On top of that, Deltex Medical Group specializes in mobile technology applications for medical purposes. The company’s main product, the TrueVue Modalities, visualizes and measures blood flow in the central circulation.
Looking at the historical performance of Deltex Medical Group, the share price has been on a downward slope since the company went public. Nevertheless, Deltex is a company in a recovery mode and a key player in producing ultrasound blood flow measurement devices, as well as hemodynamic monitoring.
- Price: £1.35
- YTD Return: -7.14
- 1 Year Return: -14.75
- Market Cap: £6.82m
AfriTin Mining Ltd (LON: ATM)
AfriTin Mining is a mining company that acquires, develops, and mines tin assets in Guernsey, South Africa, and Namibia. The company was established in 2017, and specialise on mineral development of vanadium, tin, coal assets, and other interests in Southern Africa. AfriTin Mining flagship projects include the Uis Tin project and Mokopane Tin.
AfriTin Mining (LON:ATM) is the first pure tin company listed on the AIM Market with a vision to produce a portfolio of high-quality African tin assets. The company’s CEO Anthony Viljoen has recently confirmed that despite the lockdown, mining operations at the Uis Tin mine in Namibia have now returned to full scale. As a result, shares spiked by more than 70% since the announcement.
- Price: £2.45
- YTD Return: -22.50
- 1 Year Return: -31.62
- Market Cap: £15.19m
Mobile Streams (LON: MOS)
Mobile Stream is another company that is hoping to recover after a sharp fall in its business operation. The company was founded in 1999 as a research and consulting company and soon after, Mobile Stream launched its first consumer mobile internet services.
Nowadays, Mobile Stream offers enterprise solutions, content distribution, mobile games distribution, and content insights. Mobile Streams shares (LON:MOS) spiked after the company announced the launch of its SaaS Insight platform and so far in 2020, shares of Mobile Stream rose by 78.57% YTD.
- Price: £0.25
- YTD Return: 78.57
- 1 Year Return: 56.25
- Market Cap: £2.87m
Oracle Power PLC (LON: ORCP)
Oracle Power PLC is an international power and natural resource company that focuses on delivering affordable power in emerging developing markets. Oracle Power shares are among the most popular and traded penny shares in the UK with an average volume of around £30m per day.
In December 2019, the company has announced a major partnership with China Coal, and The Private Office of HH Sheik Ahmed Dalmook Juma AL Maktoum, two of the largest energy companies in the world. And in July 2020, Oracle Power signed-up for a £46.5m of potential funding with Riverfort Global Capital. Taking the above into consideration, Oracle Power Plc has a lot of growth potential.
- Price: £0.70
- YTD Return: -34.69
- 1 Year Return: 150.00
- Market Cap: £15.84m
BigDish Plc (LON: DISH)
BigDish Plc is a food technology company that operates a yield management platform for restaurants in the United Kingdom. By developing a software that helps restaurants fill empty tables, BigDish can optimize their revenues. The company is still in the early stage of development, but its technology is promising enough that it has gained investors’ attention since its Initial Public Offering in 2018.
The share price of the company increased by 81.25% YTD as BigDish revealed that new restaurants signed up to its yield management platform amid the coronavirus pandemic lockdowns. Yet, the BigDish management team has recently announced it would require further funding at some point.
- Price: £1.73
- YTD Return: 81.25
- 1 Year Return: -55.61
- Market Cap: £7.59m
Image Scan Holdings Plc (LON: IGE)
Image Scan Holdings plc is a technology group that develops real-time x-ray screening systems. Its main product, the 3DX-RAY, offers a range of portable, and static security solutions to the security sector worldwide.
So far this year, shares of Image Scan Holdings Plc (LON: IGE) have doubled and still have room to grow since the introduction of new technology and after signing a partnership agreement with a security technology company. This partnership is expected to lead to the launch of a new range of security X-ray screening systems.
- Price: £2.65
- YTD Return: 106.06
- 1 Year Return: -30.61
- Market Cap: £2.32m
KEFI Minerals (LON: KEFI)
KEFI Minerals Plc is a mining exploration and development company based in Turkey focused on gold and copper deposits in the Arabian-Nubian area. The company has two main projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia. KEFI’s flagship project is Tulu Kapi in Western Ethiopia, which is expected to be highly profitable with the hopes of producing 140,000 ounces annually for seven years of mining the open pit.
As expected, Kefi Minerals (LON: KEFI) shares soared higher following the approval of the Ethiopian government to start the mining operation. The Tulu Kapi gold project is expected to be the largest single export generator in the country.
- Price: £1.64
- YTD Return: 19.41
- 1 Year Return: 24.54
- Market Cap: £28.43m
Amur Minerals Corporation (LON: AMC)
- Price: £2.39
- YTD Return: 4.14
- 1 Year Return: 7.79
- Market Cap: £20.09m
Rockfire Resources PLC (LON: ROCK)
Rockfire Resources is a British company engaged in extraction, exploration, and production of gold, copper, silver, and other precious metals with a number of projects located in northern Queensland, Australia.
Rockfire Resources PLC (LON: ROCK) have seen their shares bounce sharply from the previous year, yielding a 62.96% YTY return. This is mainly due to the company’s announcement of a major £0.8m drilling program on Plateau, its most advanced project.
- Price: £1.13
- YTD Return: -6.38
- 1 Year Return: 62.96
- Market Cap: £6.96m
Penny Share Trading Strategies and Tips
Trading penny shares can be highly profitable if you find the right trading strategies to detect the right positions. Even though the odds are against you when you buy a penny share, you want to be in the right place at the right time to make high returns. To help you get started, we listed some of the tips and strategies that you should apply when you trade penny shares in the UK.
Use limit order: The fact that penny shares are illiquid assets is a major disadvantage but can also be an advantage when you use it correctly. If you enter the level 2 order book of a certain penny share, you will notice that the buy and sell spread is wide and occasionally, you can place an order in the market to buy the shares although there’s no one else in the market that is willing to sell the share. This can be an opportunity. When you trade AIM penny shares, you will notice that you will have many ongoing orders simultaneously with the hope that you will get the execution of some of these orders. When your order is executed, you switch sides and immediately try to sell the shares.
The pump and dump trading strategy: UK Penny shares tend to operate below the mainstream, meaning you will have to follow news sites and forums where you can get some information about the company before it goes to mainstream media. Some penny share trades are short term positions that are basically ‘pump and dump’ transactions. This requires you to utilize research skills rather than advanced trading and analytical skills.
Penny shares sectors: Another useful tip is to find and focus on one sector. For example, the cannabis industry is made up of small companies that issued penny shares. You can, therefore, focus on one industry and become an ‘expert’ of the companies listed in a particular sector.
What are the Risks of Penny Shares?
Although UK penny shares can potentially offer high rewards, you must be aware of the risks involved in entering this market. Here’s what to consider if you’re thinking of investing in the best penny shares to buy now.
Penny shares are often traded in unregulated exchanges: Since penny shares are usually shares of small companies and trade over the counter, most exchanges, and institutions avoid applying the same requirements as regular shares. Evidently, the AIM is not regulated but instead falls within the classification of a Multilateral Trading Facility (MTF).
Penny shares are illiquid assets: Penny shares are illiquid assets, meaning that an investor can buy penny shares online in the UK but no one else will be interested in buying the shares when the investor wants to sell them. This makes the entry and exit points difficult to manage and can occasionally generate big losses even if the share price stays at the same level.
Penny shares pumping and dumping: A pump and dump is a type of investment associated with penny shares. Fraudsters promote the stock in various methods and create a sort of a ‘bubble’. But once the price of penny share spikes, the promoters get rid of the shares and create the opposite sentiment around the company. While this can be an opportunity, you must be careful to sell the share before the ‘dumping’ begins.
Lack of information and price manipulation: One of the problems of those who invest in penny shares is finding financial information and news about the relevant company. This happens because most penny share companies are not obligated to report their financials. Further, UK penny shares are a perfect asset for price manipulation, though price manipulation can often work to your benefit.
How to Buy Penny Shares in the UK
Once you have found an online broker that allows you to trade penny shares in the UK, you can open a trading account and start trading. Below, we will show you how to invest in the best penny shares to buy now with our top-rated FCA broker, eToro.
Step 1: Create an Account and Verify your Identity
First, you’ll have to visit eToro’s website and sign up for a trading account. eToro requires you to fill in your personal details and submit the necessary documentation that verifies your identity.
Step 2: Deposit Funds
Obviously, if you want to trade with real money, you’ll have to deposit funds. eToro allows you to deposit funds through one of the following payment methods: credit/debit card, PayPal, Skrill, wire transfer, Neteller, and UnionPay. For UK investors, eToro requires a minimum deposit of £140 (200 USD).
Step 3: Buy and Sell Penny Shares
Now, you can start trading penny shares. Take note that you will have to search for attractive penny shares in the UK as well as on other exchanges. Once you have found a penny share company you wish to buy, click on the company’s box and you will be transferred to the share page. On the share page, you can get access to Twitter feed about the company and its share, stats, and interactive chart.
Once you are ready to place an order, click on the ‘Trade’ button and a new window will be opened up. Simply insert the amount of the trade, the leverage ratio, the type of order, and a stop-loss rate. To complete your purchase, click on the ‘Open Trade’ button.
The Alternative Investment Market (AIM) market is the UK exchange for small and medium-size growth companies and is basically the sub-market for the London Stock Exchange. If you are looking for penny shares, you will need a broker that gives you access to the AIM market. This can be done through a traditional brokerage firm that allows you to buy physical penny shares, or via a CFD broker that gives you access to speculate on penny shares prices. It’s advisable, therefore, that you choose one of the brokers above.
After you have found an online broker that suits your needs, it’s time to make your own research, and form a trading strategy. The bottom line, you must remember that trading penny shares can be highly rewarding but is also extremely risky. Nevertheless, if you master your penny shares trading skills, it is certainly possible to make high returns.
If you do want to invest in the best penny shares to buy, we recommend using our top-rated broker, eToro. With over 800 shares, 0% commission, and innovative copy trading tools, eToro is an excellent all-round choice. Simply click the link below to get started today!
eToro: Buy Penny Shares With No Commission
- Over 800 shares
- Buy shares or trade CFDs
- 0% commission
- Social and copy trading
- FCA regulated
What are penny shares?
The term penny shares refers to a security issued by a very small company that trades at a value of less than £5 per share. Penny shares are considered a speculative asset but also a highly rewarding asset.
Do penny shares pay dividends?
Typically, penny shares companies do not pay dividends since these companies tend to be very small with little income or companies in financial trouble.
Which are the best penny shares to buy now?
We advise you to use our recommended penny shares on the list above at the beginning of your journey. But as a rule of thumb, you would have to pick penny shares that are legit and liquid so you can get the most out of your trading account. Further, search for additional information about the company such as balance sheet, cash flow, and the company's debt when looking for the best penny shares to buy now.
How can I make money from penny shares?
The majority of UK penny shares investors are looking for a one long term investment that might yield a dramatic return. Eventually, the penny share market is a difficult one, and the most important thing you can do when you choose a penny share is to analyze the company and confirm that it's not a fake company. You also have to take into consideration the negative trading track record - this means that you will, most likely, lose most the trades but you will try to win one major score.
How do I sell penny shares?
The same way as you buy penny shares. UK Penny shares are typically illiquid assets, which means you might encounter a situation where no one else wants to buy your shares. For that reason, it is important to find a penny share with a relatively high trading volume. Further, if you decide to trade penny shares on a CFD platform, the broker must fulfill the transaction regardless of the situation of the underlying asset.