Interactive Brokers Review: Are they the Best Stock Brokers?

Interactive Brokers Review
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Interactive Brokers specializes in multi-asset trading, offering a wide selection of tradeable international stocks. Along with a cutting-edge, institutional-grade trading platform suite, it offers low pricing, top-notch research, and education.

Professional traders will appreciate its extensive order types and advanced trading tools, but beginners may find these capabilities overwhelming as MetaTrader is not an alternative platform option.

Let’s examine Interactive Brokers in more detail to decide if it’s right for your investing needs.

Who Should Use Interactive Brokers?

For institutional investors and experienced, active traders who require a robust trading environment and access to a wide range of asset classes, Interactive Brokers is the best option. The broker has made an effort to appeal to a broader audience by launching additional goods, services, and informational materials for investors and traders who aren’t as active. IBKR is a platform for professionals that may deter inexperienced investors. The business welcomes customers from more than 220 nations and territories and offers trading on 135 markets spread across 33 countries utilizing 23 different currencies.

Pros 

  • Numerous options are available globally and across different asset classes.
  • Superior implementation of orders
  • Fantastic trading tools
  • Low interest rates on margin

Cons

  • Clients of IBKR Lite are not permitted to use the SmartRouter.
  • For less experienced and active investors, it can seem daunting.
  • No automated trading or bespoke trading algorithms backtesting

Interactive Brokers: Is it secure?

Interactive Brokers has a Trust Score of 99 out of 99, which makes it a low-risk investment. Eight tier-1 regulators (high trust), one tier-2 regulator (medium trust), and none of the three tier-3 agencies have authorized publicly traded Interactive Brokers, which does not run a bank (low trust). 

  • The tier-1 regulators listed below have granted Interactive Brokers authorization: IIROC, SFC, JFSA, FCA, MAS, CBI – Ireland.
  • Also, a tier-1 regulator, the Commodity Futures Trading Commission, has authorized Interactive Brokers (CFTC).

Security and Reliability

IBKR’s security measures exceed industry standards. Among them are:

Top Recommended Platforms

MIN. DEPOSIT

$250

EXCL. OFFER

USER RATING

9.8

4.9/5

73% of retail investor accounts lose money trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

MIN. DEPOSIT

$50

EXCL. OFFER

USER RATING

9.7

4.8/5

CFDs are complex instruments and carry a high risk of losing money quickly through leverage. 78% of retail investor accounts lose money when trading CFDs from this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

MIN. DEPOSIT

$250

EXCL. OFFER

USER RATING

9.3

4.5/5

CFDs are complex instruments and involve a high risk of losing money quickly because of the leverage effect. 65.3% of retail investor accounts lose money trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

  • The mobile app supports biometric authentication (face and fingerprint). 
  • Multi-factor authentication is available in several forms.
  • The Securities Investor Protection Corporation (SIPC) protects client securities accounts at Interactive Brokers LLC for up to $500,000 with a $250,00 cash limit. There is an aggregate limit of $150 million on excess SIPC coverage (with a $900,000 cash limit).
  • On eligible cash balances, Interactive Brokers’ Bank Deposit Sweep program provides $2,500,000 of FDIC insurance on top of their existing $250,000 SIPC coverage.
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Investment offering

Interactive Brokers allow traders to trade global markets on a variety of occasions. Depending on where you live and which Interactive Brokers company manages your account, you may only be able to access specific markets. 

Trading cryptocurrency at Interactive Brokers is not available via CFDs. However, thanks to Interactive Brokers’ collaboration with Paxos, you can purchase the underlying asset (such as Bitcoin) through stock trading. Neither U.K. residents nor retail traders from a broker’s U.K. firm can trade cryptocurrency CFDs.

Usability

The onboarding procedure for IBKR has become simpler in recent years. Even opening an account without immediately funding is possible (you have 90 days to do so). The website is well-designed, and you can find what you need with the help of the Client Portal and IBot, an AI-powered digital assistant.

Interactive Brokers offers support for various trading platforms, including desktop, online, and mobile (IBKR Mobile) versions compatible with iOS and Android phones and tablets. The web platform and the app are almost identical in functionality, but neither is as feature-rich as the company’s flagship trading platform, Trader Workstation (TWS).

On any platform, you can trade the same asset classes. You may access real-time streaming data, charts, sketching tools, research, and news on all devices.

There are various sources to choose from, such as Benzinga, Dow Jones, Morningstar, Seeking Alpha, Thomson Reuters, Refinitiv, and internal comments. For a monthly fee, subscribers can access premium news. You can share watchlists between mobile and web.

Trade Experience

The client portal of IBKR is a valuable tool for checking positions, getting a real-time account view, and making simple trades. Accessing a trade ticket and configuring trade defaults is simple. However, most investors will use Trader Workstation to maximize their Interactive Brokers account (TWS).

TWS has far more functionality and is intended for active investors and traders who need flexibility and want to trade various items. Whether you stage orders individually or in batches, you can configure hotkeys to place orders quickly. 

You may place, change, and manage orders directly from the chart. There are streaming real-time quotes, charts, and news available across multiple devices at the same time.

Fees and commissions

However, it is challenging to draw exact comparisons because Interactive Brokers doesn’t provide its average forex spreads. Interactive Brokers does appear to offer reasonable pricing. Despite this, we collected a week’s average spread data sample for the EUR/USD, reaching a total of 0.6 pips after commission.

Forex pricing: Commissions per side for forex trading start at 0.00002 (0.2 basis points) of the U.S. dollar trade value with a minimum of $2 per order ($4 per round turn), but they can go as low as 0.08 basis points for particularly active traders.

Forex account: At Interactive Brokers, purchasing and selling $100,000 worth of EUR/USD would incur a commission equivalent of around 0.40 pips in addition to any applicable spreads. That represents a low commission rate for forex trading overall (note: IBKR Lite and IBKR Pro accounts support forex trading but are not commission-free).

Minimum charge: The minimum commission for each trade is $2 per side, making trading fewer than 100,000 units of currency more expensive. When trading fewer than 50,000 units of currency, Saxo Bank charges a $3 per-order cost comparable to the lowest price offered by Interactive Brokers for forex trading.

Commissions and method of execution: Interactive Brokers collects pricing for forex traders from 17 of the biggest interbank forex dealers in the globe. Interactive Brokers assesses a commission of $8 to $20 per trade instead of marking up spreads. This cost is equivalent to brokers who provide commission-based agency execution for forex trading.

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Active traders: Special discounts are available to active traders who meet minimum monthly trading volume requirements. For instance, if you trade $1 billion or more in FX, the minimum fee reduces to $1.5, and when you sell $5 billion or more every month, it drops to just $1 per order.

Also, Interactive Brokers can handle significant transaction volumes on a Request For Quote (RFQ) basis to reduce market impact and give the best possible execution to clients.

 

Mobile trading apps

IBKR Mobile can be complicated to customize for forex trading, but the app provides a robust trading environment that rivals the top multi-asset brokers in the market. Our innovation award went to Interactive Brokers’ recently released IMPACT app.

Apps overview: IBKR, the company’s leading mobile app for forex and CFD trading, is accessible for iOS users on the Apple App Store and Android users on Google Play. Interactive Brokers offers the IMPACT app for trading stocks and cryptocurrencies. Apps also provide many web-based features.

One comprehensive feature is its most recent Impact dashboard, which allows you to compare portfolio KPIs to environmental, social, and governance (ESG) considerations. Additionally, there is a lengthy list of preconfigured watchlists (two of which are tailored exclusively for forex), as well as an economic calendar with the option of adding alerts and the ability to limit its display to events that are specifically related to forex.

Charting: Rich charting and trade execution from within the charts are both aspects of the IBKR mobile app. Although there are only 127 available indications, I was happy to see that they seamlessly sync with the TWS desktop platform despite the absence of drawing tools.

Accessibility: When viewing a specific chart, related news headlines appear in a field next to it. This feature is incredibly beneficial for comparing how news affects market values. The IBKR Mobile app offers videos and streaming TV, another function replicating the desktop experience. However, the IBKR app can occasionally be challenging, especially compared to market leaders’ top mobile trading apps.

Innovation: The IBot feature, also accessible in TWS, enables you to communicate with an AI-powered bot (either by typing or via voice command). This carefully created gadget can recognize commands and follow them.

Portfolio Analysis

You can track, consolidate, and analyze your entire financial performance with the Portfolio Analyst from IBKR. You can link your savings, checking, annuity, incentive plan, and credit card accounts to understand your financial situation better. 

Although there is no charge for the tool (even if you don’t have an IBKR account), the advanced features and real-time portfolio updates are only available to customers.

The buying power, margin, and balance calculations are all performed in real-time. Also, in real-time, you can calculate your internal rate of return. 

You can override the default matching method with IBKR’s Tax Optimizer tool. With the Tax Optimizer, you can preview P&L for each matching method using the “what-if” capability.

Transparency

The Financial Industry Regulatory Authority (FINRA) stated on August 10, 2020, that it had penalized Interactive Brokers LLC $15 million for many shortcomings in its anti-money laundering (AML) program. A total of $38 million in fines were paid to the three agencies on the same day that the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) announced their respective disciplinary proceedings and fines.

On their website, the Pricing tab provides information about IBKR’s complex pricing structure. By asset type (e.g., stocks, ETFs, and warrants; options, futures, and FOPs) and plan (i.e., tiered, fixed, or free (IBKR Lite) pricing), commissions are separated.

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Customer service

IBKR has a long history of poor customer service, but the corporation strives to change that. An artificial intelligence engine powers its IBot service, which answers queries in plain English. Also, customers can find answers via IBot, accessible across the internet and trading platforms, without waiting a long time.

  • Telephone support is available 24/7.
  • Online conversation with a live representative (available from within the trading platform or website)
  • Secure messaging system 
  • IBot, powered by AI, leads users to online resources and FAQs.

Final Thoughts

There are several products and resources that Interactive Brokers offers, as well as the technology you can use. Overall, IBKR is best suited to sophisticated, experienced traders who wish to access a wide variety of assets and a robust toolkit.

 A good feature of interactive brokers is that they can offer all of those assets through a single account, which is a convenient option that not all brokers provide.

The wealth of tools and information available to novice investors may still deter some despite IBKR’s efforts to make its technology more user-friendly. 

However, Interactive Brokers may be a logical next step if you have outgrown the offerings of your present broker or if you anticipate doing so soon.

FAQ

Which Interactive Brokers account should I create?

With Interactive Brokers (UGMA & UTMA), you can open individual taxable accounts, trusts, and individual retirement accounts (IRAs).

Those who wish to open defined IRAs can only do so if they are U.S. citizens. If you are interested in investing in an IRA through Interactive Brokers, you can choose from standard, rollover, Roth, and simplified employee pension (SEP) plans.

What is the purpose of the account? One of the IRAs will suit your needs if you are a U.S. customer and saving for retirement. If not, most investors will choose individual, joint, or trust taxable accounts.

That said, Interactive Brokers offers accounts not aimed at individuals with different terms and conditions. These accounts include family offices, advisors, money managers, proprietary trading groups, and more.

Regular investors won’t be affected by this, but it is again another illustration of the depth and breadth of the Interactive Brokers platform.

What exchange fees does IBKR charge?

Regarding FX trading, Interactive Brokers adds a per-trade commission to the rates it aggregates from interbank liquidity providers (LPs) and distributes them directly to its clients. The same procedure also applies to currency conversion, which lets you change your account balance currency. Upon conversion, you’ll receive notification of the underlying forex rates.

How does FX trading work at Interactive Brokers?

Through its desktop, web, and mobile trading apps, Interactive Brokers serves FX traders. The Trader Workstation (TWS) desktop has a section devoted to FX Trading, where you can create and submit orders for IBKR to process. You can trade forex on the web and mobile apps like the desktop version. Nevertheless, many of the sophisticated capabilities found on TWS for FX trading are absent from online and mobile apps.

Does IBKR allow forex trading?

IBKR clients can trade currencies everywhere, except in the United States, where only institutional clients are permitted. In other words, unless you fulfill the criterion of an Eligible Contract Participant (ECP) with at least $10 million in assets, you cannot trade forex with IBKR if you are a retail or professional client in the United States.

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