Tradestation vs Interactive Brokers

August 17, 2018 — 3:08 PM EDT

TradeStation and Interactive Brokers both target experienced investors who need broad access to the capital markets, advanced order entry tools, and low costs. Of the two, Interactive Brokers has focused more on providing the lowest costs and widest range of market access while TradeStation has specialized in trading technology including backtesting, charting, automated trading, and tools for system design.

A Quick Look

 

 
 
 
 
 
 
 
 

 Products & Fees

  • Stock trade fees: $5.00
  • Account minimum: $0
  • Stock trade fees: $0.005 per share
  • Account minimum: $0

 Fast Facts

  • Competitive per-trade fees
  • Advanced tools
  • Free real-time data on options trading
  • Access a variety of products
  • $121.6 billion in client assets
  • Industry-leading low commissions

 User Experience

  • Split-second trade execution
  • Designed with the advanced trader in mind
  • Desktop trader offers direct-market access
  • Mobile app available on both Android and iPhone
  • Easy to navigate for both mobile and desktop
  • Lightening fast trade execution
  • Trade anywhere across PCs, web pages, and mobile apps
  • IB Key technology for more security

 Education

  • Live webcast series
  • Tradestation University
  • Impressive education section
  • Trader's University with free webinars and courses

 Research & Insights

  • RadarScreen-scanning and ranking of financial assets
  • Trading simulator
  • Strong research
  • Social sentiment
  • Portfolio Analyst
  • Probability lab

 Customer Support

  • 24-hour phone, email, and live chat
  • 24-hour phone service during market days

 

Products and Fees

The two brokers both offer ETFs, mutual funds, stocks, options, and futures, but Interactive Brokers also offers treasuries, bonds (corporate, CD, and municipal) Forex, and CFDs. TradeStation charges a flat commission of 5 dollars per trade, but at Interactive Brokers, stock trades cost half a cent per share. Options and futures commissions are also less expensive at Interactive Brokers, and neither broker offers free trading in ETFs or mutual funds.

TradeStation requires a minimum initial deposit of $500 to open an account and applies a $50 inactivity fee to accounts that don't meet a minimum trading requirement of at least five trades annually, or the minimum end-of-month equity balance of $2,000. Interactive Brokers does not require an initial deposit or an end-of-month equity balance.

Trust

Neither firm offers banking services, so accounts aren’t protected under the FDIC. However, both companies cover the first $500,000 of account cash and securities through the Securities Investor Protection Corporation (or the SIPC.) Lloyd's of London insures an additional $29.5 million of Interactive Brokers' clients' money and $24.5 million of TradeStation's clients' money.

Interactive Brokers is publically traded on the Nasdaq and reports quarterly corporate statements to the SEC that disclose earnings, income, and client metrics on a quarterly basis. TradeStation is owned and operated by Monex Group Inc., which is listed on the Tokyo Stock Exchange, and the New York Stock Exchange. Being a public company doesn’t guarantee solvency in a crisis, but it gives investors additional insight and potential transparency into both firms that they might not otherwise have.

Customer Service

Interactive Brokers' offers 24/5 phone support on weekdays, although at night their customer support centers transfer to overseas markets, which can make contact more difficult. The team at Interactive Brokers also offer email and live chat options. The chatroom attendants are very knowledgeable about the desktop and mobile software, but phone agents have a reputation for being brusque, which may be off-putting for new investors. TradeStation offers a similar service level; however, they operate phone assistance 24/6, including Sunday. On top of that, TradeStation’s FAQ pages are more extensive and useful for do-it-yourself investors.

Desktop Experience

Interactive Brokers' desktop application has much less functionality than TradeStation’s. The platform is built on Java, text-based, and requires deep menu drills to manipulate the software. However, once a trader has mastered the cumbersome platform, navigating between market venues and instruments can be very efficient. Trade execution is fast but unforgiving if you make a mistake.

TradeStation's desktop platform is the gold standard for active online trading; the experience is tailored to fit advanced and active traders. Account holders have direct market access, hundreds of charting indicators, analytical tools, and automatic trade execution. Curious traders can also trade on paper to test drive a strategy before committing real money. The platform’s layouts are flexible and can be customized to accommodate your trading style. However, if you are not an active trader, the extensive tools may be confusing. Education is available, but the learning curve is steep.

Mobile Experience

Interactive Brokers does a little better in its iOS and Android apps. The slimmed down mobile version of the desktop platform has PIN security and charting that rivals the desktop version. Mobile may be inadequate for active traders who use sophisticated order types or have a lot of capital risk. Also, logging into Interactive Brokers' mobile app will shut the desktop version down which may be frustrating for investors trying to work on both platforms.

Available on iOS and Android, TradeStation's mobile app takes the core features of its desktop platform and gives you real-time, mobile access to the market. Our reviewer found the mobile application to be a little difficult to navigate, which could be a function of cramming so much functionality into a smaller format.

Insights, Special Features, and Education

Interactive Brokers' education is weak compared to TradeStation. There is content addressing specific market topics, but there are some important gaps. For example, Interactive Brokers’ Traders' Academy seems intended to provide detailed course material but has just two programs, TWS for Beginners and an Introduction to Options. Like Interactive Brokers, TradeStation’s target client is an advanced, active trader, but there is still a wide selection of educational resources covering strategy, markets, and the trading platform. Investors can also tune into the Morning Market Briefing webcast to hear from popular analysts and get a rundown of what they need to know before trading starts.

Interactive Brokers' offers several useful special features which can help investors think about the risks of certain trades and help decipher options markets including one called the "Probability Lab." However, these features are difficult to access through the platform because of the Java-based menu drilling needed to find them.

TradeStation’s key benefit is its analytical tools, backtesting software, and charting. The software is extremely robust and can be used to test strategies on past data and then execute trades in the live market. Traders can create custom technical indicators and trading rules using TradeStation’s “EasyLanguage,” which is similar to C.

The Bottom Line

Interactive Brokers’ focus on low cost and wide market access is likely to be most attractive to active, experienced investors who already have the tools they need for analysis, research, and strategy development from third-parties. Although TradeStation’s costs are higher than Interactive Brokers, they are not out of line with industry averages. Throughout TradeStation’s long history (going back to 1982 when it was known as Omega Research) the broker has been known for its backtesting and automatic strategy execution technology. For investors with the programming know-how, this functionality may give TradeStation an edge over Interactive Brokers regardless of the difference in cost.