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Interactive Brokers Review by Active Stock and Futures Trader

IB's Trader Workstation (TWS)** Must Read ** - Before you choose an online broker for trading, you must read this highly informative article How Active Traders Choose an Online Discount Broker, to help you make a more informed comparison and choice.

Interactive Brokers LLC, or better known as IB in active trading circles, is an online discount broker which consistently gets high marks as a software based broker, and also one with very competitive trade costs by Barron's. Interactive Brokers' subsidiary, Timber Hill LLC, is one of the top market makers of exchange listed equity and index options around the world. IB is now listed at the NASDAQ stock exchange under the symbol IBKR.

Popular With Retail and Professional Traders

IB is one of the most popular brokers among active traders and investors. The primary reason for this is because IB provides an excellent, no-nonsense trading platform at hard-to-beat commission rates. The availability of the Universal account alone is reason enough to give IB high marks as it saves the trader from messing with different account types for different financial instruments like stocks, futures & options. A new trader may be intimidated by IB's Trader Workstation (TWS) trading interface and lack of hand-holding, but this is only temporary. When the trader learns how to use the TWS system and gets the hang of it, there is hardly anything better for quickly getting in and out of volatile markets. IB has also introduced mobileTWS for Android and Apple iPhone/iPad (read review). This mobile app allows basic functionality without an IB account but to use the full functionality, an IB account is mandatory. mobileTWS is a must-have for traders who have to be away from their workstations and who have orders working in the market.

For those wanting to try out and get familiar with the various features of TWS, IB also offers a complete functional demo version called Live Workstation Demo. They also allow opening a papertrading account using TWS prior to going "live" in the real markets, so that one has the chance to fine-tune their trading strategy using IB's PaperTrader.

Key Feature - Availability of the Universal Account

Interactive Brokers allows you to trade equities, exchange-traded funds (ETFs), options, futures, foreign exchange and bonds on global markets all from a single account in a single currency. You have a choice of which currency to use as your base currency when you sign up. All this is available from a powerful single interface on IB's Trader Workstation (TWS). Some of IB's competitors, including optionsXpress and MB Trading, have also started to provide similar accounts. Many other brokers would require a trader to maintain separate accounts for stocks, futures and options.

Application Programming Interface

Due to IB's extensive opening up of their Application Programming Interface (API), a trader using TWS has many 3rd party add-ons and applications which can connect directly to TWS and provide additional functionality. Medved Quotetracker is an excellent example of a 3rd party charting program which can integrate with TWS and use IB's excellent data-feed to chart the markets. IB's API are also available for DDE for Excel, Java, C++, and ActiveX.

Robust Data-Feed in Fast Markets

It must be noted that IB's data-feed is one of the very few low cost data-feeds available which is robust enough to not be significantly affected during "fast markets" created by market-moving news days like FOMC meetings, etc. This is the time when other popular traditional data vendors like eSignal, QCharts and IQFeed will tend to lag badly. IB's data is not 100% perfect as there are times when it will also suffer some downtime like the rest, but in general, it is a pretty hardy data-feed suitable for day trading fast instruments like ES (e-mini S&P 500 Futures). One of the key differences however between IB's data feed and providers like IQFeed is that IB's data feed is not true tick data. IB consolidates its data every few milliseconds and then sends it out to users. This is of little or no issue if you are not using tick charts but only displaying charts of higher timeframes like 5, 10 and 60 mins.

Third-Party Applications Make Trading With IB Easier

Some other 3rd party add-ons which add value to IB's TWS include ButtonTrader, Ninja Trader and Bracket-Trader, to name a few. These automated order entry tools are indispensable when day trading futures and stocks with very high liquidity as they can immensely improve one's order entry speed and accuracy. These software automatically generate your profit target and stop loss orders as soon as you are filled on your initiating order, based on preset parameters set by you, the trader. In response to the popularity of such tools, IB has recently improved its BookTrader and Depth of Market (DOM) features which allow greater functionality and ease when day-trading stocks and futures. IB's BookTrader allows traders to visually see the market depth, in relation to their stop loss orders and profit targets. BookTrader can easily be configured to enter, exit or reverse positions quickly with just a click of the mouse.

Investment Choices

  • Stocks
  • Mutual Funds
  • Options
  • Exchange Traded Funds (ETFs)
  • Bonds
  • Forex

Commissions*

  • Stocks - $0.01 per share upto 500 shares. $0.005 thereafter.
  • Futures - $4.80 RT
  • Options - $1.00 per contract (for premium => $0.10)

*Note - Refer to IB's site for the latest rates

Trading Tools

  • Trader Workstation
  • Mobile Trader
  • WebTrader
  • API Software
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