Interactive Brokers vs TradeStation
Interactive Brokers vs TradeStation: which is the best brokerage for you and your money? Today we will be reviewing and comparing the ins and outs of Interactive Brokers vs TradeStation.
Both brokerages are highly regarded as go-to options for the most active and technical traders around the world.
TradeStation with its flagship program TradeStation 10 and Interactive Brokers Trader Workstation (TWS) provide top of the line charting and analyses for their clients.
For investors that trade consistently with higher volumes, both firms offer immense price and rate benefits, unlike many one size fits all online brokerage accounts.
From the beginning both companies have largely curtailed their features and offerings to savvy, seasoned investors, but both Interactive Brokers and TradeStation are racing to streamline their processes for mainstreet investors.
Although many believe both platforms are cut from the same cloth, there are significant advantages and disadvantages to both.
Today we will attempt to simplify the offerings of both complex services and provide potential investors with an idea of which brokerage may best suit their needs.
Interactive Brokers has long been regarded by many as the go to option for traders seeking international exposure.
Interactive Brokers offers one of the most expansive product offerings on the market with access to forex, metals, 100s of international markets, and a multitude of currencies, including the recent addition of 4 cryptocurrencies (Bitcoin, Litecoin, Etherium, and Bitcoin Cash).
Meanwhile, TradeStation fails to offer trading of any international market exchanges, forex, metals, or fractional shares.
Additionally, Interactive Brokers allows trading of thousands of free low or no cost mutual funds and bonds, while TradeStation requires mutual fund and bond transactions to go through broker assistance.
Nevertheless, in comparison to many online brokerages, both Interactive Brokers and TradeStation have a substantial amount of products available to their customers.
Novice investors beware; although both brokerages have made significant efforts to simplify the overall trading process, both trading platforms remain technically complex.
Interactive Brokers TWS and TradeStation 10 are loved by many advanced investors for the ability to customize their trading experience and are known to possess a multitude of charting and trading analyses.
Nevertheless, both companies are intent on making their trading experience accessible to the beginner investor and both continue to simplify the buy/sell process, in addition to creating numerous educational courses and tutorials for their respective products.
Both companies offer multiple trading experiences through a desktop, browser enabled, and mobile platform.
Pricing and Commissions
Interactive Brokers offers two different account versions for its users known as IBKR Lite and IBKR Pro, both of which consist of slightly different pricing and pros and cons of their own.
For a better understanding of these options we recommend you check out our 2022 review of Interactive Brokers.
TradeStation and Interactive Brokers both provide commission free options for investors trading US based stocks and ETFs
However, IBKR Lite and all of TradeStation’s offerings utilize payment for order flow practices that allow the respective brokers to sell client orders to market makers that in return pay to execute the trades themselves, often keeping the bid/ask spread.
This practice allows both parties to offer commission free trading to their clients in exchange for less favorable price execution.
Nevertheless, Interactive Brokers clients that opt for the IBKR Pro model are not subject to payment for order flow and their trades are executed efficiently and directly.
Moreover, both companies offer a tiered commission structure for active, high volume clients that lowers significantly based on the number of monthly transactions achieved.
Options and Margin
TradeStation, depending on your plan selection, offers pricing of $.50 or $.60 per contract, the lowest of which is the best baseline in the industry.
Interactive Brokers option fees are $.65 per contract and are decreased down to $.15 per contract with sufficient trading volume in their tiered IBKR Pro plan.
For general options trading, TradeStation probably offers the better option for low cost trading, with the exception of investors that plan to trade high volumes of option contracts.
As far as margin trading is concerned Interactive Brokers maintains its hold on industry low rates. Starting at just 2.58% for its Lite users and as low as .75% for high value Pro Investors.
Meanwhile TradeStation’s starting rate is 9.5%, but does reach as low as 3.5% for its largest margin users.
For investors interested in large margin use, Interactive Brokers certainly offers a huge price advantage over the competition.
While Interactive Brokers does charge its clients for broker assisted trading support, it largely avoids the use of account fees, as an attempt to expand its market reach.
TradeStation, on the other hand, is known to exact a large amount of recurring fees on certain investors.
For example TradeStation charges investors a $50 inactivity fee per year, although this fee can be waived by maintaining an account value over $2000 or by conducting at least 5 transactions per annum.
Furthermore, TradeStation charges its users one of the largest exit fees in the industry of $125 for the closure of an account. TradeStation clients that hold an IRA are charged $30 annually and a one time fee of $50 for closing.
Interactive Brokers does not charge its clients for closures.
Research and Education Resources
Although neither brokerage is known for its ease of use or expansive educational library, their approaches do differ.
Interactive Brokers offers its clients a number of free courses and seminars, largely aimed at improving technical and analytical skills.
Additionally, Interactive Brokers offers a vast amount of both free and subscription based news and market data.
TradeStation is in the process of overhauling their own educational content, but they do currently offer a number of free resources that help new investors to better understand and utilize the TradeStation 10 application.
Overall, while neither is perfect, Interactive Brokers provides the most options for investors seeking to receive the majority of their market data, news, and research through a single platform, albeit for a cost.
In our eyes, advanced investors and traders looking to up their technical skills should take a serious look at both TradeStation and Interactive Brokers as great platforms for learning and growth.
While Interactive Brokers does offer an expansive amount of international products, both companies allow traders access to a much higher level of investing opportunities than many of the traditional online brokerage platforms.
For newer investors, both TWS and TradeStation 10 may seem like overwhelming options, but we believe they may present fantastic learning opportunities, in combination with the respective platforms’ commission-free trading options.
Overall, both Interactive Brokers and TradeStation are masters of the advanced trading platform space and continue to take concrete steps to compete with the new age of low cost online brokerages.
With a continued focus on mainstreet investment trends and developments, we believe both companies have the potential to to maintain their technical advantage, while carving out additional space in the market.