Brief Overview

While many day-trading brokers continue to charge equity commissions, Interactive Brokers is one firm that has launched $0 trading. Despite its new pricing schedule, it still provides some really good software. Keep reading for an in-depth analysis.

Services Offered

Interactive Brokers specializes in global trading of a wide range of assets. These include:

• Options
• Futures
• Options on futures
• Stocks
• Closed-end funds
• ETFs
• Mutual funds
• Warrants
• Forex
• Contracts for difference
• Precious metals
• Bonds
• Single stock futures (SSFs)

Besides trading these products on the American exchanges, IB provides access to many foreign exchanges.

Some examples include:

• Canada
• Hong Kong
• Australia
• Japan
• South Korea
• Singapore
• Netherlands
• Spain
• Italy
• Germany

Pricing Schedule

Interactive Brokers has two commission schedules: IBKR Lite and IBKR Pro. The Lite plan offers commission-free trading in U.S.-listed ETFs and stocks. There is no minimum balance requirement, and perhaps most importantly, no monthly maintenance fee.

Interactive Brokers is known for its $10 per-month maintenance fee, which it does assess on the IBKR Pro schedule. It is reduced by commissions paid during the month.

Pro customers do have to pay commissions on U.S.-listed (and foreign-listed) stocks and ETFs. Traders can choose either a fixed or tiered schedule. Commissions can be as high as 1% of trade value or as low as 35¢ for U.S. securities. Commissions on foreign assets vary by exchange.

The primary advantages of the Pro system are:

• Lower margin rates
• A longer pre-market session
• More software tools

Commissions for options and futures vary based on a wide variety of issues. On the Belgian exchange, for example, futures are €4.50 per contract. On the U.S. exchanges, they typically are less than a dollar per contract.

Day Trading

Although Interactive Brokers is a global company, it does enforce America’s pattern day-trading rule for U.S. customers. The only way around this policy is to have a foreign address on your account.

If you don’t have a foreign address and want to day trade securities, you’ll need $25,000 in assets. But there are ways around this, too. You can day trade futures or forex at Interactive Brokers without maintaining $25,000 in account equity.

In all cases, day and swing traders at Interactive Brokers get a lot of great tools.

These include:

• Level II data
• Order routing
• Software that keeps track of day trades

Leverage and Shorting

Interactive Brokers provides 4:1 leverage on intraday long positions. Overnight leverage is 2:1.

For short positions, initial and maintenance margin requirements vary from 100% to 30%. The exact value depends on the price of the stock.

IBKR Pro customers get lower margin rates than Lite customers. Currently, Pro clients pay between 0.75% and 1.59% for margin debits, which is an absolute steal. Lite customers still get a very good rate at a flat 2.59% at any balance.

Interactive Brokers has a web-based short locate tool that can identify bonds and stocks available for borrowing. What I really like about it is that it returns total equity shares that are available for shorting.

The tool also displays the fees and rebates that are available on a stock.

 

Trading Tools

When you find the asset you want to trade, Interactive Brokers has several software platforms to choose from. Here are the most popular programs:

Client Portal 

The simplest trading experience will be found on Interactive Brokers’ client portal. This is a browser-based trading environment that has several good tools. During my testing, I really liked:

• Trade ticket with on-close orders
• Charting courtesy of TradingView
• Multiple watchlists with trading straight from a list
• In-depth stock research

Interactive Brokers recently added whole-dollar investing to its trade ticket on the client portal. This means you can specify a whole-dollar amount instead of a whole number of shares.

For example, you can trade less than one share of Amazon, which is currently trading above $3,000 per share.

The newest feature on the client portal is iBot. This is the company’s artificial intelligence. I posed several questions to it and received both correct and incorrect answers. It is found with the IB icon in the lower-right corner of the screen.

 

Trader Workstation

For a more advanced experience you can use Trader Workstation. This is IB’s flagship software program. Unlike the client portal, you can launch the program in demo mode. Doing so will give you some practice before committing real money.

TWS offers two basic layouts: Classic and Mosaic. The two systems provide a lot of the same tools. They simply use different graphical interfaces.

 

In Mosaic mode, the order ticket by default sits in the upper-left corner. It provides features not available on the client portal. These include:

• Direct-access routing
• Bracket and OCO orders
• Margin calculator

Charting on TWS is on a very high level. During my investigation, I found these advanced features:

• Right-click trading
• Many drawing tools, including Fibonacci retracements
• Full-screen mode
• More than 120 technical indicators

 

Mobile App 

If you can’t be at your desk, you can use IB’s mobile app instead. It does have a lot of advanced features that I really like. Highlights include:

• Simulated trading mode
• Currency converter
• Several pre-installed watchlists
• Advanced charting tools

 

There are two order tickets on the mobile app, a regular vertical version and a horizontal wheel order system. The vertical ticket delivers several advanced order types.

These include:

• Market/limit if touched
• Trail limit
• On-close orders 

Swiping from right to left on the order ticket produces a graph with all the software’s great charting tools.

The wheel order ticket pre-fills limit prices with share and dollar amounts. Just click on the appropriate numbers and select buy or sell. It’s that simple.

 

Other Software

Interactive Brokers has another browser platform called Web Trader. It is available only to IBKR Pro customers. Surprisingly, it is very simple compared to the broker’s other trading tools.

Pro customers also get API functionality, an advanced service that Lite customers don’t get.

Stock Research Tools

Not to be overlooked on the client portal is the platform’s very good stock research tools. They are located under the Research tab on a stock’s profile.

Highlights include:

• Consensus trade recommendation from multiple analysts
• Price targets
• Ratings history
• Price ratios in bar chart format
• Dividend details
• Analysts’ forecasts for earnings
• Social sentiment trends 

The client portal also has a stock screener. Just click on the menu icon located in the upper-left portion of the screen.

 

Options, Forex, and Futures Trading

Options can be traded on the client portal, but forex and futures cannot. These assets can be traded on Trader Workstation, which also delivers the most advanced option tools. These include:

• Probability lab
• Integrated spreads
• Strategy builder with the ability to create your own multi-leg order
• Volatility skew tool
• Strategy lab

Trader Workstation also has a forex trading window. It can be launched in either Mosaic or Classic mode. By default, 9 dealing boxes are shown; although this can be changed in the settings.

Submitting a forex order is very simple. Just click on the sell tile (with a red background) or buy tile (indicated with a blue background). An order will be added to the top of the forex window. Then click on Transmit to send the order.

Futures don’t get their own trading window, although a contract can be added to the forex window. Alternatively, you can create a watchlist of futures contracts. At that point, it’s easy to click on a contract to populate the platform’s regular order ticket.

Remember that while option trades do count towards your PDT limit, futures and forex trades do not.

 

Bottom Line

Interactive Brokers offers day and swing traders a lot of great tools at low prices. With professional-level software and $0 commissions on U.S.-listed stocks and ETFs, this broker is very hard to beat.