Should you consider using IBKR? Are you a short-seller struggling to find shares to short? Or better yet, is your trade execution dismal? Do you want to trade in international markets but can’t? Maybe your problem has nothing to do with your set up but everything to do with your brokerage account. And choosing the wrong broker can cost you serious money.
Luckily for you, there is a solution, and its name is Interactive Brokers. That said, should you consider using IBKR? It depends. But, by the end of this blog, you’ll know if it’s the right broker for you.
Should You Consider Using IBKR? My Top 6 Likes
- Global Trading. IB allows you to trade over 100 markets in over 24 countries
- Short Locate. One of their best features is their ability to locate shorts
- Custom Orders. You can place over 30 different types of buy/sell orders
- Paper Trading. You can practice with $1,000,000 in paper “monopoly” money, which is much more than the typical paper trading demo accounts.
- Low Margin Rates. Let me tell you this; nothing will induce fear and losses faster than a margin call. Luckily with IB’s low margin rates, the chances of this happening are significantly lower.
- Low Fees. IB is known for having some of the lowest fees and commissions in the industry with a fixed and tiered fee structure. And, like most brokers, prices differ depending on markets traded.
IBKR in a Nutshell
IBKR is well known for two key elements; their international trading platform, and low fees and commissions. One of the best features of the Interactive Brokers Traders Work Station (TWS) platform is their shorting ability.
Compared to other brokers I’ve researched, IB has the most substantial amount of stocks available to short. Trader Workstation (TWS) is Interactive Broker’s proprietary trading platform. On the whole, IB is suited best for serious traders looking to trade on international and even exotic markets.
Worldwide it’s used by tens of thousands of traders as it allows you access to markets in 24 countries. Including pretty much the whole spectrum of securities from equities to bonds, to forex to commodities.
One of the things most investors prefer about TWS is that you can customize it, including making use of third-party plugins and apps to suit your trading style.
Fees Broken Down
For shares, it will cost you 0.005 with a minimum fee of $1 for each order and a maximum fee of 0.5% for the order. For those of you who like options, the fees range from 0.25 to 0.70 per contract with a minimum charge of $1 per order. These fees are much lower than what’s found elsewhere in the industry.
Take Fidelity, IBKR’s nearest competitor, for example. Fidelity charges $7.95 for 100 shares whereas IB charges only $1.00 for the same 100 shares.
To be honest, active, high volume traders will struggle to find a more competitive platform than IB. Furthermore, unlike most other brokers, IB does not charge an additional flat fee on top of their costs and commissions.
Worth A Mention
For those tech folks, this will be right up your alley. IB has some unique features that set them apart from other brokerages such as the Apple Watch feature.
If you wear an Apple watch, IB can send alerts and trading information to your device. If that wasn’t enough, enter the concept of iBot, pretty much artificial intelligence at your fingertips.
I had to take a second glance when I read this. You can actually ask questions such as ‘What is my current P&L on trade ABC?‘ and iBot will instantly answer you.
So yeah, this is pretty cool. And as you can see, these are some pretty advanced and unique tools and aren’t available at every other broker out there. It’s interesting to see what’s on the cutting edge and IB indeed sits right on it.
Should You Consider Using IBKR? My Top 5 Cons
- Charts. The charts are clunky and compared to the rest of the platform, they will let you down. I’ve seen much better out there like Thinkorswim for example.
- Minimum Opening Deposit. Unfortunately, you will need to cough up at least $10,000 to open an account which can be steep for those just starting or those with smaller portfolios.
- For Advanced Traders. To truly take advantage of your IB account, you will need to be an experienced, active trader.
- Minimum Monthly Fees. Regardless if you make a trade or not, you have to pay a minimum of $10 in commissions every month.
- Complex. A word of warning, the TWS is Java-based which means it might be confusing at first, especially if you’re not familiar with Java.
Who Is IBKR Best Suited For?
IB is ideal if you are an experienced, active trader. The low commission structure, fees and minimum balance requirements most benefit high volume and high-frequency traders.
Those for whom investing is serious business. Combined with access to international markets makes it ideal for those looking to dip their toes in faraway waters.
It’s also most certainly for those wanting to save on commissions, which is probably most traders. Interactive Brokers commissions are some of the lowest in the entire industry.
On the flipside, beginner traders may find TWS somewhat overwhelming. Using the advanced features will require a steep learning curve, one beyond your needs and abilities.
Quite frankly, you’d be better served to master the fundamentals before using a platform like this. Besides, if you plan to dabble, the minimum commissions and balance requirements will cost you unnecessary fees.
That’s why, for beginner traders, I recommend learning on a platform like Thinkorswim.
Where To Go From Here
Bullish Bears is a pay it forward trading service. Because of that, we provide educational tools and materials to all of our members, many free of charge.
We want you to succeed, you will succeed, and we will show you how. If you’re ready to learn to trade like a pro, join us today.