Interactive Brokers Review [December 2020]
Interactive Brokers offers some of the lowest commission rates in the industry. With a strong trading platform in the Interactive Brokers Webtrader, the broker seems to be an industry leader. But, how right is Interactive Brokers for you? To answer this question, here is the 2020 review of Interactive Brokers.
Who is the Ideal Customer?
Interactive Brokers is designed to serve the institutional investors, the active and the sophisticated trader. However, the Broker is providing essential services that are useful to the less active or newer investors. These services include educational resources and customer support.
Account Types: 6
Interactive Brokers offer three account types.
- Cash Accounts: This is the default account. You can only trade with the physical money that is in your account.
- Margin Accounts: With this option, you can trade on margin. A customer can buy stocks with money they do not have. Interactive brokers lend money to a client to trade in the stock market. The loan is subject to interest.
- Portfolio Margin Accounts: With such accounts, you can open positions like the regular margin accounts except that the account type uses alternative methods to calculate margin requirements. Portfolio margin accounts come with greater leverage and higher minimum account requirements ($100,000).
Demo Account: 8
Interactive Brokers’ free trial version allows for unlimited simulated trading with virtual funds. Customers can use the demo account to get familiar with the markets, test, and develop effective strategies. Once signed in, you can enjoy access to multiple financial instruments and trading tools.
Assets to Trade: 9
Interactive Brokers‘ range of offerings is second to none. Based on customer demand and links to newer electronic exchanges, Interactive Brokers add new products from time to time. In April this year, the firm expanded its mutual fund marketplace to almost 26,000 funds.
Apart from Bitcoin futures, the firm does not offer cryptocurrency trading. Below are all the asset classes that are offered under the Interactive Brokers’ umbrella:
- OTCBB (penny stocks)
- Mutual funds
- Single-leg and multi-leg options (up to eight legs)
- Futures and futures options
- Forex (23 currencies, 115 currency pairs)
- International assets
- Fractional share trading
- IPOs, warrants, and single stock futures
Trading Fees: 5
2019 saw big changes among online brokers. Most firms are cutting their equity commissions to $0. Interactive brokers have gone from having some of the industry’s lowest costs to be the most expensive with its Pro offering. Interactive Brokers has a rather complex fee structure. There are three types of commissions charged for US equities. They include the following:
Fixed Per-Share Pricing: Charges $0.005 (half a cent) per share with a maximum of 1% of trade value and a minimum of $1. The pricing includes all exchange and regulatory fees.
Tiered Per-Share Pricing: Based on monthly order activity. Pricing ranges from a high of $0.035 per share for less than 300,000 shares per month to $0.0005 per share for over 100,000,000 shares a month. A minimum rate of $0.35 per share is in effect. This pricing does not include exchange or regulatory fees. A trader may get rebates on maker-taker fees that are assessed by some venues.
IBKR Lite Program: It pays to sign up for a premium account. IBKR Lite account holders get free trades for US-listed equities. Traders are routed to generate payments for order flows that are not shared with the customer.
Trading Platforms: 8
The Trader Workstation (TWS) is Interactive Brokers’ flagship desktop trading application. The platform is packed full of features that cover all spectrums of different trading products. Due to the complexity of the platform, TWS has quite the learning curve.
Interactive brokers do not directly offer to trade on MetaTrader. To use this third-party trading platform, a trader must master code and utilize particular APIs.
Trading on the go is available through IBKR mobile app. The application is highly customizable and features AI tools (IBot), mobile charts, and forex-specific tools. You can also stream TV and video content from your IBKR mobile app.
Deposits and Withdrawals: 7
For deposits, the Broker supports bank wire transfers, US Automated Clearing House (ACH) initiated transfers, checks, online bill payments, and more. The Interactive Brokers’ Mastercard debit card allows customers to spend and borrow directly against their accounts.
Interactive Brokers allow for one free withdrawal each month. Second and subsequent withdrawals are subject to fees.
Research and Education: 8
Interactive Brokers offers a wide range of research tools and resources. In-depth research tools are available on the Client Portal and mobile apps. Research amenities on traders Workstation is a little bit advanced and includes international trading data and real-time scans.
Other research amenities include:
- Stock scanners
- ETF screeners
- Mutual fund screeners
- Fixed income screeners
- Research tools and calculators
- Trading Idea generators
- Third-party research
- Charting tools
- Sustainability research
Interactive Brokers offers a wide range of educational programs. The Trader’s Academy is a structured curriculum intended for educators, investors, financial professionals, and students. There are over 45 courses available in the program. Quizzes and tests are also available to benchmark the progress of students. Educational resources are available free of charge. You do not need logins to access education.
Customer Support: 7
In the past, Interactive Brokers had a reputation for lackluster customer services. They have since worked on improving their offerings in this department. One exciting improvement the Broker made was the introduction of IBKR’s IBot service. This artificial intelligence product can answer questions that are asked in plain English and directs customers to the FAQ section.
Other features of Interactive Brokers’ customer support include:
- 24/5 phone lines with a callback service
- Online chat with human agents
- Secure message center
Interactive Brokers is an excellent choice for the professional trader. The combination of competitive trading costs, the TWS platform, and a diverse range of products makes Interactive Brokers a formidable force in the industry. The institutional trader will develop a particular liking for this firm.
Before choosing this broker, you should consider the commissions and fees. Decide whether Interactive Brokers is a good fit for your trading style. I would not recommend IB to the low-volume trader.