Interactive against brokers. TradeStation: What’s Right For You?
Two of the most popular online brokers are Interactive Brokers and TradeStation, and they both target higher volume active traders than most traditional online players. But each also offers a number of features that might appeal to new or intermediate investors, including low prices, a wide range of marketable securities, and powerful trading platforms.
Interactive Brokers and TradeStation therefore offer many interesting features. Let’s break them down by comparing them across five major factors that matter to investors.
Interactive Brokers and TradeStation both have two main pricing tiers, each of which may also appeal to a different group of customers.
Interactive Brokers offers two main formulas:
- Pro: The broker’s original plan offers trading in stocks and ETFs at a minimum of $ 1, but it is a minimum. The broker charges half a cent per share, so once your trade exceeds 200 shares, you will exceed that minimum. For example, a transaction of 1,000 shares could cost $ 5.
- Light: This low cost plan allows you to make unlimited trades in stocks and ETFs at no cost. However, you won’t take advantage of the broker’s lowest margin rates in this plan (more below).
The two main plans of TradeStation are set up as follows:
- TS SELECT: This plan allows you to trade stocks and ETFs without commission and options for $ 0.60 per contract. You will also have free access to TradeStation Desktop. This plan requires a minimum deposit of $ 2,000.
- TS GO: This plan allows you to trade stocks and ETFs without commission and options for $ 0.50 per contract. However, you will pay a substantial premium for each trade with TradeStation Desktop, although you still have access to free trading platforms. This plan has no minimum deposit.
When it comes to options trading, Interactive Brokers offers standard pricing at $ 0.65 per contract, with a minimum of $ 1. Trade over 10,000 contracts per month? You’ll benefit from standard pricing of $ 0.50 per contract and price drops as low as $ 0.15 per contract for negotiating over 100,000 contracts.
TradeStation charges $ 0.50 or $ 0.60 per contract depending on which plan you use. The benchmark of $ 0.50 is the lowest unreduced price in the industry, excluding no-charge brokers such as Webull and Robinhood.
Edge: For stock and ETF commissions, these brokers are neck and neck. You can choose a commission-free plan with either broker and get started – and that’s probably enough for most investors. For options, TradeStation seems like the better choice given its lower standard price if you trade dozens or even hundreds of contracts per month. But truly active traders will likely prefer Interactive’s significantly reduced commissions to higher volumes.
How do Interactive Brokers and TradeStation compare on their margin lending rates?
|0 – $ 100,000||1.59% (Reference rate + 1.5%)|
|$ 100,000 – $ 1 million||1.09% (Reference rate + 1%)|
|$ 1 million – $ 3 million||0.75% (Reference rate + 0.5% *)|
|$ 3 million – $ 200 million||0.75% (Reference rate + 0.3% *)|
|Over $ 200 million||0.75% (Reference rate + 0.3% *)|
* The broker puts a floor on these rates at 0.75%.
Interactive Brokers have margin rates that fluctuate based on the benchmark rate. As of April 2021, the highest rate charged is 1.59% (for margin balances less than $ 100,000), then it decreases to 1.09% and so on, as the loan amount over. margin increases.
Interactive Brokers’ rates are tiered, which means that no matter how much you borrow, you will always pay the rate at each tier. For example, if you borrow $ 200,000, you pay the base rate for the first $ 100,000 (the benchmark plus 1.5%). Then, for the next $ 100,000, you pay the rate for that tier (the benchmark rate plus 1%), up to $ 1 million in borrowing, and so on.
|0 – 49,999 $||9.5%|
|$ 50,000 – $ 499,999||8.75 percent|
|$ 500,000 – $ 1,999,999||5.5 percent|
|Over $ 2 million||3.5 percent|
TradeStation rates are subject to adjustment if global interest rates fluctuate.
Edge: Interactive Brokers is the big winner here, with lower rates even for smaller margin loans. The more you borrow, the lower the rate. In fact, US interest rates are so low (and expected to be low for a while) that Interactive Brokers need to floor their lowest rates at 0.75%. Otherwise, the margin rates would be even lower.
TradeStation and Interactive Brokers both offer one of the broadest lines of tradable securities in the industry. In fact, each offers at least one type that is not offered by the other. Here’s how they stack up:
Interactive Brokers and TradeStation are related in all major categories (stocks, ETFs, bonds, options and mutual funds). When it comes to more advanced titles, however, there is some differentiation, with each bringing something different to the table. Interactive Brokers brings in forex and metals, while TradeStation offers trading in five cryptocurrencies.
Edge: Too close to call, unless you need one of the advanced trading types. If you are in need of crypto trading then TradeStation is getting the green light. Or if you need forex and metals then Interactive Brokers.
Trading platforms and tools
Brokers’ trading platforms and tools may be of greater appeal to more active traders, and both brokers offer several offerings in these areas, including web, desktop, and mobile platforms.
Interactive Brokers has several ways of trading, but emphasizes its Trader workstation. It is a complete desktop platform that offers real-time monitoring, market data, customizable charts and streaming news and allows you to trade over 100 markets. You will get options analysis tools and be able to downgrade to the old WebTrader platform or trade from the client portal.
A recent addition to Interactive Brokers’ suite of tools is a detailed rating system for ESG (environmental, social and governance) factors. It rates companies on a number of granular areas (such as emissions or human rights) and provides a score for each ESG category and overall. You can quickly compare companies with an easy-to-use chart.
TradeStation brings together a web platform and its flagship TradeStation Desktop platform. The latter brings more than 10 types of charts with dozens of technical indicators, or you can create your own. You will also have decades of historical data. If this option sounds appealing to you, you will probably need to go for the broker’s TS SELECT pricing plan.
TradeStation offers a number of tools, including OptionsStation Pro, for analyzing and executing options trades, and Portfolio Maestro, which analyzes your portfolio to reduce the risk overexposure of your holdings. You get back-testing tool, market depth, watchlists, and so on.
Edge: Both brokers offer a ton of solid trading tools and platforms, so who wins may depend a lot more on your needs or what you are comfortable using than what the broker provides. And for new investors, don’t be put off by complex platforms and tools. You will still have access to a streamlined order entry that puts your order on the market without all the analysis.
Interactive Brokers and TradeStation both charge higher fees than some of Bankrate’s top rated brokers (such as Fidelity), but in some cases you can ignore these fees with a few simple actions.
Interactive Brokers Pro requires you to generate at least $ 10 in commissions each month, if your account is less than $ 100,000. If you don’t, you will be billed the difference, up to $ 10 per month. If your account is less than $ 2,000, your monthly minimum is $ 20. But if you have more than $ 100,000 of equity in your account, you won’t have a monthly minimum at all. However, if you are using the Lite platform, you will not be charged any activity fees.
Among the large account fees, Interactive Brokers does not charge transfer fees for ACATS transfers, which are typically around $ 75 with other brokers.
TradeStation charges an inactivity fee of $ 50 per year, although you can easily avoid them if you have an average balance of over $ 2,000 or if you’ve made five or more transactions in a 12-month period.
But beware of other TradeStation fees. The broker charges $ 35 per year for an IRA and will cost you an additional $ 50 for terminating an IRA. Plus, it costs you one of the highest transfer fees in the industry at $ 125.
Edge: Interactive brokers. But this race is closer to the call than it looks when comparing Interactive’s Pro platform with TradeStation. If you have more than $ 100,000 in your account, Interactive Brokers is probably the winner, as you can ignore the TradeStation fees. But small accounts may prefer TradeStation if they don’t trade frequently or have an IRA there. That said, Interactive’s Lite platform allows you to skip broker activity fees and trade for free as well.
At the end of the line
While Interactive Brokers offers a lot, so does TradeStation, especially in certain areas, such as cryptocurrency trading. If you want to trade crypto without entering the futures market, you’ll want to look to TradeStation (or another broker that offers it). But if low margin rates really determine your bottom line, then maybe Interactive Brokers is your choice.
So what is best for you depends not only on the broker but also on your specific needs. If you’re looking for good overall brokers with a little more research, education, and a reputation for customer service, you should also consider Fidelity and Charles Schwab.