This article was updated on January 9, 2020
In previous articles I have spoken about how many investors don’t succeed with DIY investing, and invest themselves online without proper training.
However, for those that want to DIY, is Interactive Brokers a decent offering? This will be the topic of today’s article. For questions – email@example.com
‘Interactive Brokers’ is one of the best US-based Brokerage firms where you can get access to 125 markets in 31 countries all around the world, using 22 different types of currencies. It is listed on the NYSE (The New York Stock Exchange). Originally it was started in the year 1977 with the name of ‘T.P.& co.,’ after a few years, in 1982, it was changed to the name ‘Timber Hill Inc.’ Later in the time period between 1993 and 1994 the group name Interactive Brokers was created.
Using an account on Interactive Brokers you can get access to stocks, options, forex, futures, bonds, fixed incomes, CFDs and ETFs. Unlike many other brokerage firms, Interactive Brokers services are available 24 hours a day and 6 days a week, which can be considered as a potential advantage while trading. A noteworthy option is that a combined business can be made between Individual Investors, Individual Traders, Financial Advisors, Fund Managers, and Third-Party Service Providers.
Interactive Brokers is considered one of the best online brokerage firms available as it has an exquisite set of tools especially for investors who are enthusiastic about tracking the trending global investments. Anyone can easily be able to access the market using a desktop or a mobile device. In October 2019, a commission-free service known by the name ‘IBKR Lite’ was launched. The features of the new service offer clients trading of US-listed stocks and ETFs without any commission fee. This service can only be accessed through the company’s Web-based platform or its mobile applications.
Interactive Brokers has achieved many awards in recent years and is considered to be one of the top online trading platforms. Some of the awards received and achievements made by them are as follows:
- ‘Barron’s – 2019 Best Online Brokers’ – It was mentioned as the best online broker in the year 2019, for nine consecutive years by ‘Barron’s’ (American Weekly Magazine/Newspaper).
- ‘HFM Technology – US Technology Awards’ – It has received the Best Application for remote working award from ‘HFM Technology’ in the category of US Technology Awards in the year 2019.
- ‘StockBrokers.com Annual Review 2019’ – It stands out as the winner for 2019 Annual Review by ‘StockBrokers.com’. it has also received 4 out of 5 stars in their overall category. It ranks in the first position for Commission and Fees category, Offering of Investments, Active Trading, and Professional Trading.
- ‘Investopedia – Online Broker Awards 2019’ – Interactive Brokers was also ranked in the first position for Best for Low Costs category by ‘Investopedia’ in its Online Broker Awards 2019. It was also listed as number one in Best for International Trading, Best for Options Trading and Best for Day Trading categories from Investopedia.
- ‘Investor’s Business daily’ – It came out on top for the categories Best for Low Commission and Fees, Best for Mobile Trading Platform/Apps, Best for Range of Products and Best for Website Security by ‘Investor’s Business daily’.
- ‘Fund Intelligence’ – Interactive Brokers has also received Winner award for Best Broker-Dealer Features in ‘Fund Technology and WSL Awards 2019’.
Interactive Brokers offers a simple, clear and easy to use trading platform which can be easily understood even by beginners. Investors can be able to access any market venue using the Trader Workstation and can place large orders with the help of the built-in algorithms.
It has the smartest order router in its execution engine through which excellent execution can be achieved by re-routing the parts of your order (either all parts of your order or a few parts of your order) as it stands at the top of the changes in the market conditions. It also helps in attaining price improvement and maximizing possible rebates.
Hidden institutional order flows can be accessed by the order router in order to execute larger block orders. The router finds optimized results for executing each leg of a spread for multi-leg options order, or route for rebates can be chosen by the clients. Standard Interactive Brokers Clients receive any payments given back for the order flow.
‘Web Trading Platform’ – While trading online at Interactive Brokers, an investor can be able to choose between ‘Client Portal and Web trader’. Between these two Client Portal is considered to be easier to use than Web trader. The Client Portal is available in many languages such as English, German, Spanish, French, Italian, Russian, Chinese and Japanese which can be selected within the platform. The huge drawback of the client portal is that it is not customizable.
Web trader platform is considered to have the best results when used by traders with less experience, through which core features are provided for trading efficiently and managing a portfolio.
It provides a secure login system with a Two-Step Authentication Feature through which you get a secure code via email which is considered to be a safe way of logging in.
The search function is productive and very easy to use and can be found at the top of the page. You can get a list by typing the desired asset’s name.
While placing the orders you can only use order types such as ‘Market, Limit, Stop and Stop Limit.’ You won’t be able to place an order on the complex order types. Order terms such as ‘Day Order’ and ‘Good till Canceled’ can also be used.
Users are able to receive alerts and notifications through the chatbot. Performance can be tracked using the portfolio tab where Profit/Loss balance and the costs paid by the user are shown clearly. The Web-based platform is rated 4 out of 5 stars.
‘Mobile Trading Platform’ – The Mobile Trading App is considered to be easy to use when compared to the Web Platform. It is very simple to use for options trading. A comparison between two potential trades can be made using the ‘Performance Profile Tool’. Orders can be quickly sent to the market using the ‘Persistent Trade button’. Its built-in ‘IBot’ feature helps you to find advanced order types and analytical tools. It is available on both IOS and Android Platforms and the languages are the same as the Web-based platform.
The search is also provided in the mobile app and can be found at the top. It is much more user-friendly than the Web-based trading platform. Asset Types(stocks, futures, options, warrants, and CFDs) can be chosen after specifically choosing an asset.
After selecting the desired asset the user will be guided to the Information and Trading window where results such as asset market information, an interactive chart with technical indicators, related news, some fundamental information, a summary of the latest analyst’s report and the buy and sell buttons that transfer the user to the order panel.
While placing orders it is very much similar to the Web-based trading platform with the same order types and terms.
A specialized feature called Chatbot is available on the mobile app which is not included in the Web-based platform. Through this the user can be able to perform a wide variety of tasks such as executing an order, closing a position quickly, getting the required information fast and searching for company fundamentals such as dividend yields or PE ratios. The understandability of simple and basic commands makes it an excellent feature. It is rated 4 out of 5 stars.
‘Desktop Trading Platform’ – IB’s Desktop Platform has some advanced features and options for customization. It considered ideal when used by advanced traders instead of beginners as the user interface is a little bit complex. On the desktop platform, there is an availability of many functions for TWS.
With the help of the Interactive Brokers desktop trading platform, users can replicate the desired ETF, make a trade via chatbots and much more. It also has the same number of languages as the Web-based platform. However, due to the complexity of this, it is highly suggested to be used by skilled and advanced users only, as people with lesser experience cannot be able to gain much using this. Unlike the Web-based Platform, the desktop platform is highly customizable.
The desktop trading platform also has a similar two-step authentication based safe login experience like the Web-based platform and the Mobile App.
The search function is a little bit weaker as it becomes difficult for the user to filter out the unwanted results. In simple words, the search function is not as effective as it would be in others. One can be able to get the necessary accurate results by using the Chatbot.
While placing the orders, the functions are just spectacular and the user has a huge number of options. Some of the functions are best compatible with advanced and professional traders.
The order types consist of ‘Market, Limit, Stop, Stop Limit, Market on Close, Market on Open, Limit on Close, Trailing Stop, Trailing Stop Limit, Discretionary, Bracket and Forex Hedge’. It also consists of order terms such as ‘Day Order, Good till canceled, At the Open, Immediate or Cancel, Good till Date/Time and Good after Date/Time’.
Using the Configuration Panel, the user has the ability to set up the alerts and notifications through email, SMS or pop-ups. Alerts and notifications can be created for updates such as Changes in the Price, Daily Profit/Loss, Execution of Trades, etc.
||Web-based Platform||Mobile App||Desktop Trading Platform|
|Pros||User-Friendly Secure Login||Chatbot Good Search features Secure Login||Huge collection of order types Different types of alerts|
|Cons||Limited features for customizability||Complicated for beginners||Poor search results|
Markets and Products:
At Interactive Brokers, you will be able to access almost all the types of markets and trading can be done in all product types. IB is considered as the platform with the widest number of options available for trading with markets and products. With the help of IB, you can trade in ETFs, Forex, Funds, Bonds, Options, Futures, CFDs, and Crypto.
All product types from stocks to options are offered by Interactive Brokers. You can access many types of markets. Extraordinary Stock, ETF, and Bond coverage. IB’s asset management service can be of great use which is combined with Robo advisory and social trading.
A majority of stock markets are accessible by the Interactive Brokers such as ’NYSE, LSE, Polish Market, Mexican Market, etc.’ you can also trade in a wide range of penny stocks. One of the best offers provided at IB is that you make a trade with more than 20,000 ETFs, which the best ever.
When it comes to Forex, IB usually gives more than 100 currency pairs, which is not the top-rated but considered as the best offer.
With 200 Fund Providers, IB is one of the best after ‘Swissquote’. You can find funds from some big Fund Providers such as BlackRock or Vanguard and you can find funds from some smaller ones too.
With access to more than 100,000 bonds, IB stands as number one for trading in bonds (both government and corporate) when compared to the other competitors in this field.
Having the ability to find the biggest option markets such as ‘CBOE or CME’ and smaller option markets such as ‘Korea Stock Exchange and Mexican Derivatives Exchange’ IB gives the best results while trading in options.
Using IB you can get access to 36 markets (both major and minor) when trading with the futures. This is very good when compared to others.
When it comes to CFDs, IB has an average offer when compared to the other competitors. The range of trades with stock and stock index CFDs is average.
Bitcoin trades and Ether ETNs can be traded on the Swedish Stock Exchange and Bitcoin futures can be traded on the CME and CBOE futures exchanges. Bitcoin and Ether ETNs and Bitcoin Futures are the ones that come under the crypto category while trading on IB.
The asset management service enables the user to get the most satisfying results. It can be useful to copy the portfolio managers of professional traders and investors so that the user can automatically make the same trades as that of the professional traders. The minimum investment varies according to the portfolio that you are willing to make an investment in, the least investment should be at least $5,000.
Stock Index CFDs
Research and Analysis:
‘Research’ – There is a tool known as Probability Lab, which is built into the TWS. It is highly beneficial to the options traders so that they can compare market outlook according to the current conditions and suggestions are made on the strategies that can be traded.
The clients are offered free research from 100 providers such as ‘Alexandria Social Sentiment, Market Realist, Zacks, TipRanks, ValuEngine, Dow Jones and much more’. You can compare and select the companies based on your necessities with the help of ESG ratings from ‘Thomson Reuters’. Subscriptions to premium research can be bought with discounted prices on Interactive Brokers.
Good quality news flow is provided within the IB. An excellent choice of analytical tools. Availability of fundamental data. The charting feature has more than 100 technical indicators. Access is provided to news, daily summary and an economic calendar. Recommendations and news are provided by third parties.
You can find it difficult to get results such as ‘viewing the Top Ten holdings for a respective ETF, navigating TWS to conduct stocks, ETFs, bonds, and mutual funds.’ Having to learn the process of navigating TWS in order to find the required information may be difficult for some users. Basic research can be different from other brokerage firms. You must be a professional trader in order to use all the research tools available on the Interactive Brokers.
‘Analysis’ – The Portfolio Analyst service is the best and helps to get the user’s financial accounts to perform intensive analysis. The Risk Navigator tool of IB’s Portfolio Managing Service, lets the user test their portfolio in order to see how the changes in the market would affect the holdings of the respective user. The non-customers of the firm are also able to link their individual accounts and get reports. Custom benchmarks also can be created in order to compare the returns.
‘Education’ – Interactive Brokers offer Demo account, Online courses, Webinars, Educational videos, Platform tutorial videos, and glossary. IB conducts 250 live webinars every year and they have up to 900 previously recorded webinars, which can be used by the investors with less experience to gain information on various topics regarding the trading. Trader’s Insight provides huge educational content on various topics and different market sectors.
There are different ways to contact the customer service which are Using a Telephone, Through an email and via Live Chat. Interactive Brokers has one of the best Customer Service features than many other competitors in this field. The customer service is available in many languages.
‘Live Chat’ – It is certainly the most efficient way in order to approach the customer service team. The Chatbot feature lets you save time more efficiently than other features giving quick results. If are not willing to wait for receiving an email or waiting on the phone line to get connected, The Live Chat would be the most effective way for you to get faster results. It would take around 1-3 minutes to connect to the Live Chat, but once you get connected to it there would be faster results.
‘Telephone Support’ – Not as effective as Live Chat, Telephone is also a good way to approach customer support regarding any issues or queries. Although it would take some time to get connected due to a long queue of customers, the telephone support would also be a better way when compared to the email service. On average, it would take around 1-2 minutes of time for you to reach the customer service using telephone support unless there is a long line of customers waiting to reach them.
‘Email’ – Email service is also better when compared to others. The design for email support is a little bit old fashioned and wouldn’t be liked by many customers. Through email support, the user might be able to get the customer care response within a day or so. In the worst-case scenario, it might take up to 4 days.
User can be able to get relevant results from the customer service team within 1-2 minutes of time using the Live Chat or the Phone Support on an average. They are available 24/7.
|Investopedia||4.3 stars out of 5|
|StockBroker.com||3.5 stars out of 5|
|BrokerChooser||4 stars out of 5|
Commissions and Costs:
Two Pricing plans are available for Investors in Interactive Brokers which are ‘IBKR Pro and IBKR Lite’. IBKR Pro is suitable for Advanced Professionals and IBKR Lite is best for casual traders.
‘IBKR Stock Trades’ – The Standard price of US Stock trades is $0.05 per share, with the minimum being $1.00 and the maximum being 0.5% of the whole value of the trade. hence, It depends on the volume of the trade. ETF fees are also of the same price as the stock fees.
||$0.005 per share||$1||1% of the value of trade|
||CAD 0.01 per share||CAD 1||0.5% of the value of trade|
||0.1% of the value of trade||MXN 60||No|
|UK (up to £50,000 in the volume of trade)||£6.00||£6||£6|
|UK (more than £50,000 in the volume of trade)||£6.00 + 0.05% of the trade value||£6||£29|
Belgium, France, Xetra, Italy, and The Netherlands.
||0.1% of the value of trade||€4||£29|
||0.1% of the value of trade||CHF 10||No|
||0.1% of the value of trade||€4||No|
||0.1% of the value of trade||€4||€120|
||0.1% of the value of trade||PLN 15||No|
||0.05% of the value of trade||NOK/SEK 49||No|
||0.15% of the value of trade||€6||No|
Estonia, Latvia, Lithuania
||0.2% of the value of trade||€10||No|
||0.1% of the value of trade||HUF 200||No|
||0.8% of the value of trade||AUD 6||No|
|Hong Kong||0.8% of the value of trade||HKD 18||No|
||0.8% of the value of trade||JPY 80||No|
||0.01% of the value of trade||SGD 2.5||No|
‘IBKR Options Trades’ – The costs of options trades for which the Contract price is greater than $0.10 would be $0.70 per contract, for lesser than $0.10 and greater than $0.05 it would be $0.50 per contract and for a price less than $0.05 would be $0.25 per contract. In all the cases, the minimum is $1.00 and no maximum.
US (monthly contracts <=10,000)
||$0.70 per contract||$1.0|
Canada (monthly contracts <=10,000)
||CAD 1.25 per contract||CAD 1.5|
||MXN 25 per contract||MXN 25|
||£1.7 per contract||£1.7|
||€1.5 per contract||€1.5|
||€1.5 per contract||€1.5|
||€3.0 per contract||€3.0|
||€1.5 per contract||€1.5|
||NOK 12 per contract||NOK 12|
||€0.8 per contract||No|
||CHF 2.8 per contract||CHF 2.8|
||AUD 2.0 per contract||AUD 2.0|
||HKD 30 per contract||HKD 30|
||0.01% of the value of trade||INR 6|
||0.12% of the value of trade||JPY 100|
||$2.85 per contract||$2.85|
||0.2% of the option value||KRW 1,000|
‘IBKR Futures Trades’ – The pricing for the Futures Trades is also volume-based and the price per contract would be $0.85 per contract.
‘IBKR Forex Trades’ – The Forex Trades are charged with a commission on Interactive Brokers and the commission depends on the amount that is traded monthly. If there is an increase in the monthly traded amount, then there would be a decrease in the commission rates. For the monthly traded amount less than 1,000,000,000 the commission is 0.20 based on the point of trade value.
|Amount Traded every month||Commission||Minimum|
|USD <= 1,000,000,000||0.20 basis point on the value of the trade||$2.00|
|USD 1,000,000,001 – 2,000,000,000||0.15 basis point on the value of the trade||$1.50|
|USD 2,000,000,001 – 5,000,000,000||0.10 basis point on the value of the trade||$1.25|
|USD > 5,000,000,000||0.08 basis point on the value of the trade||$1.00|
‘IBKR Bond Trades’ – IBKR Bond Trade fees are considered to have the best prices when compared to that of the other competitors in this field. It also based on the volume of the trade. For a $10,000 trade, the fees would be $5.0.
||Face Value less than or equal to 10,000||0.1% * Face Value||$1||1% of the trade value|
||Face Value less than or equal to 1,000,000||0.02% * Face Value||$5||No|
||Trade Value less than or equal to 50,000||0.1% * Trade Value||€2||No|
|Hong Kong Government||Trade Value less than or equal to 15,000,000||0.08% * Trade Value||HKD 18||No|
‘IBKR CFD Trades’ – The commission fees of CFD trades at Interactive Brokers is around $0.005 per share with a minimum of $1.0 if the monthly traded amount is less than $300,000.
‘IBKR Crypto Trades’ – The commission per one Bitcoin Futures contract is $10 on CME and $5 at CBOE. The trading costs of Bitcoin and Ether ETNs are0.05% and the minimum amount is SEK 49.
‘IBKR Lite Fees’ – IBKR Lite does not charge any kind of inactivity fees or data fees. Pricing is the same as the IBKR Pro pricing. Investors may not be able to access the TWS using IBKR Lite. Trades can only be made through the Mobile App or the Client Portal.
The Annual Management Fees is priced around 0.8% to 1.5% based on the portfolio regardless of the commission fees. Unless the Investor maintains a $100,000 balance in the account or spends $30 minimum every month, He/She will be charged with the inactivity fees which may be charged up to $20 every month.
For the clients who hold more than a million dollars in their account with the firm, the margin rates vary from 3.68% to 2.68%. If the client withdraws more than once per month, they would be charged with a price of $10 per withdrawal. Withdrawal can be made only via bank transfer if you are from outside of the USA.
By considering the above-mentioned details we can come to the conclusion that Interactive Brokers is one of the best Online brokerage firms that is available on the market.
The big negative with DIY investors is that many investors don’t get the returns they desire, due to their own behavior.
Does DIY investing work?