Interactive Brokers Review

For an active trader like me, one of the primary concerns of using any broker or trading system must be cost. When you’re pushing 40 or 50 trades each day, then those trading fees sure add up. Even though I trade actively, choosing the flat rate fee structure gives me a cost of $0.005 cents per share.

So on an average trade size of 200 shares, my cost is only $1 (which is the minimum per order). That’s a massive discount to most trading platforms out there, though more expensive than SpeedTrader (which at $0.0039 per share with a minimum charge of $0.99 beats IB by a cent).

There’s also a Cost Plus option, which is a lower cent per share charge, but exchange and clearing fees are added on top. One thing to be wary of, though, is the extra charge they levy if you modify an order or cancel an order, but for plain vanilla in and out trading that’s not a problem.

Why IB?

Apart from trading costs, and a platform that gives me everything I need, IB has a great track record over the 35 years since it was founded in 1977. It has been at the forefront of some great innovation, and began life when its founder and Chairman, Thomas Peterffy, began market making in equity options in 1977. With a market making background, including encompassing the business of Timber Hill, IB understands the importance of speed and accuracy to an active trader.

More than that, it offers me access to the widest selection of international markets available, over 100 (not that I want to trade that many, but I do trade international stocks).

I can also trade mutual funds through the platform, at a market beating rate of $14.95 per trade. Compare that to Schwab’s $76 for the buy side, and Merrill Edge’s $39.95 each way, and on a cost basis there is only one winner. For IRA accounts, there are no account opening charges, or custodial fees, though there is a $10 per month administration fee.

Everything you need from a workstation

The trader workstation is easy to read, gives details of position and average price, and I can run my charts simultaneously, as well as read research and news. Pretty much all I want my work station. And there’s a virtual trading station that I can use to hone my trading strategies.

Orders are easy to place and monitor, and a neat item they have that others don’t is the ability to place multiple orders even if I don’t have the money in my account. If orders are executed that use all my available funds, then the outstanding unexecuted orders are cancelled automatically.

Having said that, the minimum amount needed to open an account is higher than most other brokers: at $10,000 this could prove off putting for some, especially as the account opening process is not the easiest to navigate (and talking about navigation, the Interactive Brokers Website is more than a little cumbersome until you get used to it).

The charting tool is industry standard, and allows me see my buy and sell levels at a glance. I can customize the colors, and add trendlines, etc. But the neat thing for me is that I can manipulate orders direct from this chart. Using my mouse, I can select support and resistance levels and place orders automatically.

I can alter these orders either by using my mouse and dragging and dropping my levels, or in the order details bar above the chart. There is also a single click trade facility, but I found it too easy to click in error, so I don’t ‘arm’ this, as IB calls it.

Trade electronically, don’t use the phone…

IB wants you to trade everything through its platform, and with its range of order capability and speed of execution I’m not sure why you wouldn’t. But for those that want to hear a voice at the end of a phone, or require assistance to trade in some way, then it does have its Trade Desk facility.

Trades executed through here are charge out at a flat fee of 1 cent per share, which isn’t bad until you realize that the minimum order size for broker assisted trades is 10,000 shares. This makes the minimum charge for such trades way more expensive than competitors such as Etrade and Merrill Edge, where fees are $45 plus standard commission, and Schwab where the charge is $25.

but stay connected with others

IB has a chat and bulletin board that allows me to trade ideas with others. It’s not moderated either, so it’s really open. There’s a reasonable amount of traffic through the chat screens, and like forums provided by brokers like Charles Schwab, you’ll find a lot of help from professional traders.

More discounted costs with access to multiple markets

There are other fees to pay, of course, such as the $10 per month market feed charge and $10 per month account fee, though these are waived if your commissions are $30 or during the charging month.

Through the IB account, I can trade multiple markets and instruments, including ETFs, which I sometimes use (many of these ETFs are charged at zero cents per share).

Great for experienced, active traders

New and inexperienced traders might be a little intimidated by the trading system, though they do offer a simulated environment called PaperTrader (handy for testing strategies). This said, it is one of the fastest trading platforms around, with direct market access.

I can see how IB’s customer service department are sometimes considered rude and aggressive, but if you’ve worked on a trading floor before the ‘get it sorted and move to the next one’ attitude won’t bother you too much. And maybe that tells you most about IB. It’s a great offering for professional traders with experience who want information at their fingertips with a no-nonsense approach at market beating rates (particularly for smaller trades up to around 1500 shares).

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