|$0 - $100,000 ||1.86%
|$100,001 - $1,000,000 ||1.36%
|$1,000,001 - $3,000,000 ||0.86%
|More than $3,000,000 ||0.50%
Interactive Brokers Overview
Interactive Brokers possibly has the widest range of investment options and the lowest prices of brokers. Trading in North American can be done for as
little as $1USD. Their trading platform is advanced with the ability to add on lots of useful functions for for active traders. The firm is also the
best broker for margin trading with lowest margin interest rates in the industry. However, inexperienced trades who make irregular investments may find
their system overwhelming. Their customer service is also not the best.
Opening the account
Opening an account can be done online through the Interactive Brokers website. The application is fairly standard and simple to complete. Their website can sometimes be slow or drop out which can make this process a bit time consuming. Certified copies of the applicant’s ID will need to be sent via post to Interactive Brokers for the account to be fully activated. The whole process can be done within a week if the website is accessible.
Applicants need to state the intended purpose of the account which may limited the functionality of the account based on their trading experience and goals. However, this can be changed later. There is a minimum opening deposit of 10,000USD, or $5000 for IRAs.
The account will have a base currency chosen at the time of application, but deposits can be made in over 20 currencies major currencies, or the the Forex services can be used to exchange money within the account. This is very convenient if trading will be done in multiple currencies/nations.
Margin loans are available and can be applied for with the initial application or once the account is open. Loans are available in over 20 currencies at extremely low rates, only slightly above the official cash rate for that currency. The current rate for $100,000 - $1,000,000USD is an amazing 1.4%. Users can select to add additional features and services such as recommendations, reporting, charting, etc. These are charge monthly or annually and more suited to active traders.
Using the account
Trading can be done either through the ‘Account Management’ site, WebTrader platform or the downloadable Trader Work Station. Login in requires the use of a physical security card which means frequent trade will need to keep the device with them if they intend to trade on the go. The trading platform is advanced and offers a large range of trading options including stock, options, futures, FOPs, ETFs, Warrants, Structures Products, SSFs, Forex, Metals, Indices, Bonds and CFDs. For experienced, active traders the trading platform is very good, for casual investors will limited needs and experience the platform can be daunting at first.
The online trading platform does not have separate pages for separate functions nor does it have an aesthetically pleasing layout. However, it is quite simple to use once the relevant parts of the platform are identified. The account will open on the ‘Account’ page. This shows account balance, portfolio, and positions. There are no pretty graphs and there is plenty of jargon but this page shows everything that an account holder needs. The ‘Order Management’ bar is at the bottom of the page and used for placing orders.
There is a monthly account fee of $10USD. However, all trade commissions go toward making up this fee, so if you pay $10USD in trading commissions you will not pay anything for the account fee.
The trading commissions are incredibly low. For the US based markets, they are $0.005 per share, with a minimum of $1 and maximum of 0.5% of the trade value. $10,000 of Bank of America shares (670 shares) would cost you $3.35. There is also a range of ETFs which can be traded commission free. The commission for the other exchanges is generally around 0.1% of the trade value or $10 for $10,000 of shares. The fees get lower for frequent traders or higher volumes. If you trade between 300,000 to 3,000,000 shares per month the commission is only $0.002 per share.
Forex rates are also extremely low. The fee is $0.00002 of trade volume with a minimum of $2USD. Basically any amount under $100,000 will be changed the minimum $2. The rate decreases for high monthly amounts. The other investments options all follow this pattern of low fees.
Realistically a casual investor will end up paying only $120 per annum for the account fee as it is unlikely their trading commissions will exceed $10USD a month. Overall the cost is extremely low and probably the biggest benefit of using Interactive Brokers.
Buying and Selling
The actual process of buy or selling is simple but the stock code and live price will be needed. Basic accounts have delayed prices so unless the price has stayed the same or gone down slightly it will not be executed at the displayed market rate. First search for the ‘Stock Code’, then enter the quantity, price and click ‘Preview Order’. This will open a popup detailing the total cost and fees, which can be either confirmed or edited. Once an order has been placed it can be amended for free as many times as needed before it settles. This is also very simple and can be done through the ‘Orders’ toggle under ‘Order Management’ bar.
Interactive Brokers provides comprehensive statements which can be created to cover set periods (monthly/annually) or specific date ranges. The statements are detailed and may seem a little complex but they are very useful. However, these can not be access through WebTrader and requires logging in to ‘Account Management’. This is one of the more annoying parts of Interactive Brokers, the account details are separate to the trading system. To update details, get statements or message Interactive Brokers users need go through the separate ‘Account Management’ system.
The second major issue is the website; It can frequently drop out or be unresponsive. This may be varying for different account holders, internet connections and locations however it can be very frustrating the account can not be accesses and used when required. The customer service is systematic and procedural but can sometimes feel slow and unresponsive. This is especially true if it is impossible to log on to the website for a day or two.
Interactive Brokers provide a large range of trading services at incredibly low prices. If the account will be used for active trading or high volumes, then it will be hard to bet them for price and functionality. The margin loans are also impressively cheap which makes them very affordable to all traders. Although the trading platform is simple it is not very intuitive or aesthetically pleasing. Casual users may find it intimidating and confusing. However, it really is very simple once understood and should be considered due to its low cost.
This article was updated on 2/10/2017.