Lightning fast dirt cheap executions in options, futures and stocks
Written: Jun 10 '04 (Updated Jun 10 '04)
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Pros: Speed, simplicity, price, stability
Cons: Minimalist service and add-ons, but many will consider this an advantage
The Bottom Line: The best value for serious traders, best used with Medved's free Quotetracker interface.
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| gregfokker's Full Review: Interactive Brokers |
Interactive Brokers is, in my view, a nearly ideal platform for serious traders interested in keeping speed up and costs low. It is not beginners, but nor does it pretend to be.
Opening your account
Everything about Interactive Brokers is web-based, from the sales pitch to the account application. The account application is... extensive, verging on an all-out endurance test. As one who is fascinated with every aspect of industry, I read the agreements, but have to confess that by the upteenth screen to check off and consent to, they lost me. As part of my authorizations for futures trading, there was a multiple choice test, also automated and online. The two mistakes I made simply required that I reanswer the questions, hit & miss style. In fact, it's a good system, as the questions are there to highlight the usual points of contention or misunderstanding in the account agreements.
Once the online marathon is complete, you receive an notification that all is in order and inviting you to fund the account. Personal cheques are accepted, but there's a delay whereas with certified cheques or money orders, the account can be activated and funded within a day.
Setup
Again, everything is online, including the software installation, customer service.. everything. You'll need to download IB's "Trader Workstation", their "TWS", and the setup screen is clear enough. An updated version of Java is required to run it, and the setup screen prompts you to install it if necessary, providing a link to Sun's download screen. This stage is relatively painless if you're at all savvy, and shouldn't take longer than a few minutes to set up and install.
Configuring the TWS is another story. The online manual is complete and you'll get up to speed quickly, but at first blush the TWS is just a live spreadsheet with an online slightly intuitive menu system. It's as light on bells and whistles as it is heavy on options and configurability, so take the time with the manual and learn its contents.
Trading
The TWS and IB philosophy is minimalist and utilitarian, a huge step up from the flowery garbage that brokerages impose on their users. There are no confirmation screens... no text for that matter. To buy or sell a position, you click on the offer or the bid and hit the "T" button to transmit it. Your fill is instant... as in, within 1 second or so.
There are no order minimums for options or futures, which are the only securities I've traded with IB, but friends have told me that stock trades are every bit as fast and cheap. Check the commission structure, but when last I checked, it was a buck a contract for options, $2-$4 for futures. Note: agricultural futures are not offered, though metals, currencies, treasury and energy futures are.
IB offers extensive order routing, with a "smart" order routing feature that automatically routes your order to the most favorable exchange. It's very, very fast and the fills are reliable- none of the monkey business that I recall from Waterhouse.
There is also an extensive system of stop losses and auto-executing orders- again, the manual is a must-read.
There are options such as "bracket" orders that will automatically enter your profit stop and stop loss orders when the primary order is filled. There's third-party software called Bracket-trader that you can use to automate this for effectively one-click trading.
Warning
IB is great, but it's minimalist. There's no real charting or other frills, but products such as Jerry Medved's most excellent, free Quotetracker download (www.quotetracker.com) use IB's realtime streaming feed to seamlessly integrate live charts and alerts, alarms and all the bells and whistles you could want.
IB is so fast and low-key that it's easy to overtrade. Be careful.
My only actual complaint would be that the transaction reporting is very weak, verging on incomprehensible, and if you don't track your daily transactions using the TWS' download function, it could get away from you. I've heard of one trader's accountant who couldn't figure out IB's monthly and year end statements.
Bottom line
For do-it-yourselfers who want to trade quickly and cheaply and who can make do with email customer support, this is the best platform I've yet seen and the first with which I've been happy. The system is reliable, with few outages or crashes.
Recommended:
Yes
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Epinions.com ID:
gregfokker
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Location: Montreal
Reviews written: 40
Trusted by: 2 members
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