Interactive Brokers

Interactive Brokers is one of the top US based discount brokers. It is the largest electronic broker in the US and is also one of the bigger forex brokers. The firm is regulated by the SEC, FCA and various other regulators. The firm is highly computerized where a vast majority of its employees are programmers and a big portion of the company is held by the employees.

Interactive Brokers was founded by the legendary innovator in computer driven trading Thomas Peterffy, who still holds the majority of the shares.  He founded his first trading firm in late 70’s which eventually became Timber Hill, a true leader in algorithmic and computerized trading. In mid 90’s Interactive Brokers was created as an electronic brokerage and is totally separated from the prop trading firm Timber Hill.

You can open an online account with a minimum 10 000 USD deposit. If you are under 26 years old the minimum requirement is 3 000 USD.

Interactive Brokers provides a great platform for the highly advanced trader, the flagship system called TWS. Fees are competitive and access to multiple markets as well as products is outstanding.

I used the platform personally a few years back for trading actively and I like it but would not recommend it for the novice trader. The TWS platform is very advanced, offers a lot to the demanding trader but is not overly user friendly if you are new to trading.

The simpler web-based trading platform version is rather limited when it comes to functionality and gives a somewhat old school feel. It is best for an overview of the portfolio and sporadic trading when you are travelling.

Interactive Brokers offers the Probability Lab product that covers the options space well. I agree with;

“Probability Lab offers a practical way to think about options without the complicated mathematics”.

The biggest negative is the relatively high min 10 000 USD capital requirement as well as I am a bit surprised you can only use bank transfers to fund/withdraw money given the firm is so technologically advanced.

General

Positive

• Powerful and advanced technological trading platform for pro traders
• Access to many markets and products
• Good fee structure
• Good options features and access to many trading algorithms

Negative

• Complex TWS system for less experienced traders
• Relatively high deposit requirements
• Poor customer support
• The web based trading platform is very 90’s

Products

• Equities
• ETFs
• Forex
• Funds
• Bonds
• Options
• Futures
• CFDs
• Cryptos

Fee structure

Positive

• Good competitive rates
• Cheap financing rates

Negative

• Greedy to charge the no activity fee although it is not high itself

The Account and Regulation

Positive

• Various account types as well as different currencies to choose from as base currency
• SEC, FCA and various other regulations. In total IB is regulated by 7 authorities

Negative

• High minimum account deposit of 10 000k USD

Trading Platforms

TWS (advanced traders)

Positive

• Great platform for the demanding pro trader
• Very good algorithms
• Many order types
• Good charting experience
• Nice alerts
• Relevant risk and p/l management functions
• Basket trader
• Advanced option trading features

Negative

• Way too advanced for novice traders
• Can get a bit complex

Web based platform

Positive

• Simple
• Good variety of order types

Negative

• Feels old school
• Ugly
• Doesn’t serve as stand alone system

Mobile Trading

Positive

• Simply love the chatbot
• User friendly
• Many order types

Negative

• The chatbot can get addictive

Research

Positive

• Various fundamental ratios available
• Short interest information available
• Analyst forecast and ratings available
• External research available, some subscription based

Negative

• Light for the pro user
• The external research is relatively poor

The TWS (Trader Work Station)

The TWS is the flagship platform. You have the default setting called the Mosaic where you can customize pretty much any feature you like. You can also choose to use the old style Classic view. Personally, I like the Mosaic view.

The TWS offers a truly unique experience as you have so many possibilities. It is an extremely advanced platform offering the most demanding trader practically any need.

If there is any negative I would say it can get a bit confusing even for the pro trader. Another issue you might experience is the vast options you obtain by simply searching for a stock name.

Below is an image of the Mosaic view customized. For example, you can link charts, news, quotes, tickers etc. to your stock name.

The bottom left shows the order management which is rather clear. Here you can change to view all trades, the overall portfolio etc. All in all, the oversight of trades, portfolio is clear and not complicated which is a positive.

I like to have the order management system very straightforward and this application is doing a good job. It is not the quickest trading platform I have used in terms of being able to type the orders quickly, but it still does a good job.

More complex order types are also easily monitored.

The TWS offers many options to pretty much whatever you need. It is all integrated in the system. To check stock loans simply click, choose from the drop down menu New window and you will have the stock loan window connected to the borrow desk. It is all integrated and smooth.

The stock loan window pops up directly. Just choose the stock.

There is a screener you can fully customize. Another easy option from the drop down menu and you will have the screener. You can choose from predefined lists or customize your list.

Being a highly technologically driven company I am not surprised to see how well they have managed to create and integrate their Volatility Lab function. Below is a quick snap of DAX index options. Instantly you get the implied volatility, skew, volume and other relevant information. This is very clearly and neatly created. I have traded millions of options contracts in my career and the Volatility Lab is a nice feature to have so easily accessible.

Interactive Brokers also provides the Probability and Strategy Lab which both are great features when it comes to viewing your options strategy from a risk/reward point of view. You can design specific options strategies, express your view and carefully evaluate your strategy. There is a myriad of possibilities to evaluate various options strategies in the option analysis section.

The Risk Management features of the TWS covers what most traders need. Beyond the VaR and other stress test measures of the portfolio, there is a comprehensive section with financial calendars and other events that can be interesting to incorporate into the risk management you are using.

The Technical Analysis section covers many of the indicators available, although personally I don’t like to use too many indicators. The charting functions are easy to find and use. Charting is very subjective and personally I like to use Bloomberg for my charting, but the charts in TWS are more than enough. Despite being so advanced I missed simple functions in the TWS such as the trend channel.

Below is a chart of UniCredit with the volume bars and the 200 day moving average plotted.

The TWS covers most traders’ needs. If you need advanced features there is also an advanced section where you can use the basket trader, spread trader, volatility trader and many other features.

Not for the novice trader, but the TWS offers basket trading as well.

The Artificial Intelligence IBot is a feature I simply love. Either tell or type what you want to trade and the intelligent IBot will do it for you.

Below is the order to buy 100 Apple. The IBot recognizes what you want to do and gives you immediate assistance. As I wrote earlier:

The IBot is great, but can get addictive

The Web based platform should be used when you don’t have access to the TWS and want to look at the overall portfolio and possibly do some trades. I don’t see it as a sufficient platform to use on a stand-alone basis. For the travelling investor wishing to monitor the portfolio the Web Platform serves good purpose, but to use it for charts or any kind of serious trading I think it doesn’t don the job for you.

Research is a not the strongest side of Interactive Brokers, but they do indeed have some research as well as up/downgrades by other analyst. I would not rely on the research provided by Interactive Brokers.

There are several external independent research firms that you can integrate in the Interactive Brokers system. Some are free and some are subscription based, but the overall quality is not enough.

Below is an image of the page showing up/downgrades.

Mobile trading with Interactive Brokers is easy, clear, smooth and gives advanced options. You can trade stocks, futures, options, fx and much more with advanced orders types while on the go.

There is a rather advanced charting function that actually is too much for the normal mobile in my taste but is a nice feature on tablets.

One proprietary feature I really liked is the order wheel function.

Another interesting feature is the options spreads function that gives you quick pricing of your strategy.

Conclusion:

Interactive Brokers is a great broker as it offers the trader many markets and products. Commissions and fees are competitive and the flagship TWS trading platform gets high points from me.

It can be a bit too sophisticated for the novice trader but give the platform some time and you will enjoy trading on the TWS.

The IBot is great and the mobile app does a good job.

Commissions:

You need a minimum of 10 000 USD to open an account with Interactive Brokers.

They offer a fixed and a tiered pricing model. Overall Interactive Brokers offers competitive fees and rates. Below are a few highlights for trading in US, Europe (we don’t show every country) and Asia. For commissions in every country we encourage you to visit the link to Interactive Brokers. For full pricing visit all commissions.

Fixed Rate Pricing

• Charges a fixed rate low commission per share or a set percent of trade value.
• Includes all exchange and regulatory fees.
• For US stocks, ETFs and warrants, the transaction fees are passed through on all stock sales.

Transparent Volume-Tiered Pricing

• Low broker commission, which decreases depending on volume, plus exchange, regulatory, and clearing fees.
• In cases where an exchange provides a rebate, IB passes some or all of the savings directly back to you.