Interactive Brokers is a solid choice for active, advanced traders because of its international trade capabilities, low — and volume-based — commissions and quality trading platform. The broker isn’t a good fit for beginners or infrequent traders, as it provides little investor education, requires a high minimum investment and charges inactivity fees that will quickly eat into returns. Such investors may want to check out NerdWallet’s list of best brokers for beginner investors.
Jan. 1, 2017
- Commissions: Fixed-rate and volume-tiered pricing, starting at $1
- Account minimum: $10,000
- Promotion: Special terms for clients 25 and younger
Interactive Brokers is best for:
- Advanced traders.
- Day traders.
- Penny stock traders.
- Margin accounts.
- Options trading.
Interactive Brokers at a glance
|Stock trading costs||0.5 cent per share; minimum $1 and maximum 0.5% of trade value; volume discount available|
|Options trades||70 cents per contract; $1 minimum order; volume discount available|
|Account minimum||$10,000; $5,000 for IRAs; $3,000 for clients 25 or younger
|Account fees (annual, transfer, closing, inactivity)||$7.50 quarterly fee for IRAs. Monthly inactivity fees range from $3 to $20.
|Trading platform||Extensive tools for advanced traders in the Trader Workstation platform
|Mobile app||Strong app and streamlined IB WebTrader browser trading platform
|Mutual funds||Nearly 3,000 no-transaction-fee mutual funds.|
|Commission-free ETFs||More than 30 commission-free ETFs|
|Research and data||Yes; additional charges for premium features
|Tradable securities||• Stocks
• Mutual funds
• Forex ($10 million in assets required)
|Customer support/branches||Phone support Monday-Friday 8 a.m.-8 p.m., Sunday 1-7 p.m. Eastern time; live chat and email support|
|Promotion||Lower minimum activity requirements ($3/month) and opening account minimum requirement ($3,000) for clients 25 and younger.
Where Interactive Brokers shines
Low commissions: It’s hard to beat the stock and exchange-traded funds commission structure at Interactive Brokers, which favors frequent, high-volume traders at just 0.5 cent per share. There’s a $1 minimum trade commission and a 0.5% maximum, and exchange and regulatory fees are included. The broker also offers tiered pricing to lower rates even more: Investors who trade more than 300,000 shares a month can pay 0.2 cent or less per share, depending on trade volume, although exchange and regulatory fees are extra on this plan.
Options trading, too, is offered at rock-bottom pricing, with just a 70 cent charge per contract and no base (minimum $1 per order), plus discounts for larger volumes.
Trading platform: Interactive Brokers’ Trader Workstation is considered one of the best trading platforms available for advanced traders. The desktop platform is fast and includes standard features like real-time monitoring, alerts, watchlists and a customizable account dashboard. An options strategy lab lets you create and submit both simple and complex multileg options orders and compare up to five options strategies at one time.
Other tools include a volatility lab, advanced charting, heat maps of sector and stock symbol performance, paper trading and a mutual fund replicator, which helps users identify ETFs that replicate the performance of a selected mutual fund but offer lower fees. A new feature, InteractiveBroker FYIs, offers customized notifications about events that could affect a trader’s investments. Research, news and market data are also available, although in many cases there’s a premium subscription fee.
Novices will likely find Trader Workstation completely overwhelming, to the point of being unusable. But Interactive Brokers also offers a strong mobile trading app and IB WebTrader, a streamlined browser trading platform that is a bit easier to navigate.
Margin rates: Traders looking to use margin will love the rates that Interactive Brokers offers; they’re extremely low. The maximum margin rate is the benchmark rate plus 1.5%. The broker charges a blended rate based on account balance. It has a calculator on its website to help investors quickly do the math based on their account balance.
Investment selection: Interactive Brokers offers access to a huge selection of products, from standard offerings of stocks, options, ETFs, mutual funds and bonds to precious metals, forex trading and futures. In a change last year, the broker began requiring assets of $10 million or more for leveraged forex positions.
Where Interactive Brokers falls short
Minimum investment requirement: The $10,000 minimum investment requirement is steeper than at other online brokers, which brings Interactive Brokers’ rating down a notch. The company does lower its minimum to $5,000 for individual retirement accounts and $3,000 for clients 25 or younger, which is a nice offering.
Inactivity fees: Here, too, the minimums are high for all but very frequent traders. Accounts with balances under $100,000 must meet a minimum of $10 a month in trade commissions, or Interactive Brokers will charge the difference as a monthly fee. Accounts with an equity balance of $2,000 or less must meet minimum trade commissions of $20. Again, there is a break here for clients 25 or younger, who have a minimum monthly trade commission of just $3.
Customer experience: Because Interactive Brokers has a variety of commission structures and added fees, it can be hard for investors to quickly identify what their costs will be. The website and trading platforms are clearly geared toward advanced traders, and the customer service is frequently reported to be subpar.
Is Interactive Brokers right for you?
Frequent and advanced traders could see significant commission savings at Interactive Brokers, due to the discounted pricing for high-volume traders. These investors will also benefit from the company’s quality trading platform and fast trade execution.
New investors likely won’t find a home here. The low commissions don’t make up for the high inactivity fees, and the account minimum and lack of educational materials and research are high barriers to entry.