Interactive Brokers Review – How Does This Broker Stack Up?

About Interactive Brokers

Interactive Brokers was founded in 1977. Over the years, it has gradually taken on a more global emphasis. Today, it offers trading on U.S. and foreign exchanges for a wide variety of financial instruments, including not only stocks and ETF’s, but also options, futures, options on futures, forex, bonds, warrants, and contracts for difference. Learn more in our Interactive Brokers Review.

Pricing

Commissions

IB caters to professional and global traders, and as a result, the broker-dealer has a complicated pricing schedule. For U.S. clients, stock and ETF trades cost 0.5¢ per share with a $1 minimum. There is a maximum commission of 0.5% of trade value. Prices for other countries vary. Some U.S.-listed exchange-traded funds are commission-free.

There is also a tiered pricing schedule for equities that charges 0.35¢ per share with a 35¢ minimum order. As with the fixed-rate plan, prices vary on non-U.S. exchanges.

Options

Option commissions for U.S.-based clients are 70¢ per contract when the premium is less than 10¢, and 25¢ when the premium is less than 5¢. There is a $1 minimum per order. As with equities, prices vary in foreign markets.

Forex

IB is one of the few securities brokers to offer currency trading. The firm charges $0.00002 × trade value for each order, and there is a $2 minimum. Accounts that trade large volumes get lower prices.

Account Requirements

There is a $10,000 minimum deposit requirement at Interactive Brokers to open an account. Traders under the age of 26 only need $3,000. IB also charges a minimum amount of commissions every month; this varies from $3 to $20.

Interactive Brokers Trading Platforms

Web-Based Platform

Interactive Brokers has a simple browser-based trading environment aptly called WebTrader. While testing it, I found it to be too elementary. For example, charting is very basic. A graph can only be displayed up to 5 years and it does not fill the width of the monitor. Furthermore, there are no drawing tools, comparisons, or technical indicators. There are, however, stock and bond scanners on the platform that are able to look for securities on specific exchanges. Some of the available criteria include most active and 26-week high.

Global indexes are displayed on the simple platform along with detailed account balances and positions. Option chains can be accessed, although I didn’t like how the program requires the user to right click on a call or put to request a multi-leg strategy.

Overall, TradeStation and TD Ameritrade have much better browser-based platforms.

Desktop Software

Traders who demand more than an elementary platform can use Trader Workstation, the broker’s flagship desktop software. I especially liked the platform’s simulated trading environment, as the software does take some time to learn.

Charting is far more sophisticated than what the browser platform delivers. Colors can be modified, and there are many technical studies available. Comparisons can be used, and a chart can be saved for later use.

What I enjoyed about the program’s charting was the level of customization and found in our Interactive Brokers review. A graph can be displayed as Heikin-Ashi bars, candlesticks, hollow candlesticks, or OHLC bars. The width of these can be adjusted and colors can be changed. Technical analysis studies can also be modified in the same way.  

The program’s order ticket can be used to send instructions for stocks, ETF’s, options, futures, and options on futures. Typing in a keyword in the search field produces a pop-up window with a variety of choices. For example, typing in the word ‘cattle’ produces futures contracts, bonds, and a few stocks that match.

Mobile Trading

The IB mobile app functions on Apple and Android devices as found in our Interactive Brokers review. There is also a platform for Apple Watch. The app for phones and tablets is able to place trades for stocks, options (including multi-leg strategies), futures, warrants, and contracts for difference. It’s easy to add an additional option leg just by tapping on another bid or ask price. An icon in the bottom-right corner can be used to add a stock leg.

A stock’s profile page includes very limited information. A stock’s chart can be displayed horizontally, and three graph styles are available. Many technical indicators can be selected, although there are no drawing tools on the app.

Research Tools

The mobile app should not be used for security research, as there is only very limited data available. The browser platform has a fairly good security screener, although it’s not as user friendly as E*Trade’s website screener.

IB’s website has lots of learning materials for new traders, although it seems somewhat odd that it would have these resources given that the broker caters to experienced investors. There are videos and web-based courses that cover topics such as short selling and technical analysis.

Interactive Brokers Customer Service

Customers in the U.S. can reach an IB representative anytime from 7:00 am until 7:00 pm, CST, during the week. There are no Saturday hours, although the company is open on Sunday from noon until 6:00 pm, presumably for futures traders. The broker can also be reached via e-mail and on-line chat as found in our Interactive Brokers review.

Executions and Routes

Interactive Brokers offers direct-access routing. Both the desktop platform and the browser-based system offer the ability to choose a specific ECN or market maker. The default option is Smart, which allows IB to choose the best venue available at the time of the order and execute the order electronically. Available market makers include EDGEA and ISLAND.

Shorting Stocks

IB customers can short sell stocks. The broker does not modify the requirements of Reg T from the Federal Reserve Board. Thus, initial margin is 50% and maintenance is 25%.

Type of Trader Interactive Brokers Review is Best For

Because Interactive Brokers has a significant emphasis on global investing, it would be an ideal broker for traders who are interested in foreign securities.

Pros…

• IB lets customers and guests try out its software with no commitment.
• The broker now has a debit Mastercard, and there are no-fees for point-of-sale transactions.
• Excellent margin rates.

…and Cons

• Annual and monthly fees can really add up.
• Commission schedule is rather complicated.

Judgment 

Interactive Brokers brings a lot to the table that day traders and other advanced investors will find appealing. Infrequent traders, though, will find better values elsewhere.