Broker Battles 2020

Markets

Mar 07

Today, largely driven by Robinhood’s commission free stock trading and their disruption: brokers are in a battle like never before to win customers and survive. Many of the top brokers offer commission free stock trading today. Recently, I have been evaluating several of the biggest brokerages for their stock, options, and futures trading. Read on to learn my top broker picks for 2020.

First, I should point out that FCM’s or futures commission merchants are almost always going to be better for futures trader over the big multi-asset retail oriented brokers (like TD Ameritrade). Professionals might also consider CQG or TT but they tend to be too expensive for most.

There are some important distinctions to be aware of. The big retail often include free futures data which could be quite expensive if buying from the exchange: however, this data is often snapshot or otherwise of a lower quality. Fill quality is another consideration to be aware of: after you place your order, the broker risk controls and order routing can delay your order. Interactive Brokers and Tradestation are direct-access. Other considerations are the financial soundness, security, apps, and technology. 

The biggest online discount brokers today would have to be: Interactive Brokers, Fidelity, TD Ameritrade, and Charles Schwab. In this post, I will summarize what I think are the strengths and weaknesses of the major brokers, and at the end, I will conclude with my favorite picks. 

Robinhood

Robinhood is most known for being (1) the fintech disruptor that brought us $0 equity & options commissions and (2) struggling to meet their promises whether it be with fractional shares, up time, or other services.

Highlights:

  • Zero-dollar stocks & Zero-dollar options
  • Simple interface & app that doesn’t encourage over trading
  • Attractive for casual investing
  • 5% margin rates compared to 9%-10% for other brokers! ($5 per month)
  • Cryptos 

Considerations:

  • Recently down for an entire trading day, some reported problems reaching their website for two whole days
  • Value proposition is less clear as most other brokers with stronger technology, support, etc. are now offering zero-dollar equities trades.
  • Obviously not suitable for active trading.
  • Zero-dollar trades are only possible because of market makers who pay for order flow. It raises questions regarding market transparency and fairness.

My Take:

First, anyone trading with Robinhood should have the proper expectations– meaning very low expectations. Even acknowledging that, they recently dropped the ball when they were down for an entire trading day and some reported they were down into the second day.

As a broker, their primarily appeal is simplicity & no commissions. However, now most other brokers are offering $0 trades in some form or another including but not limited to: Interactive Brokers, TD Ameritrade, Charles Schwab, and Tradestation.

Given that almost any other broker is likely to offer better support, software, and service: I think it is harder to justify recommending them even for the casual investor. The one advantage they still offer that beats other brokers is their zero-dollar options trading. They are the only broker that offers zero-dollar options trading to my knowledge. Regarding options pricing, you will see that there are zero dollar commissions for options trading but the rates will vary with other brokers from 50 cents to 64 cents: it is my understanding this payment is payed to market maker and is technically not a commission but looks like RH is still the leader on this front.

Interactive Brokers

Interactive Brokers is probably the #1 broker preferred by budget-minded professionals because they offer some of the best margin rates, widest selection of markets, international trader support, and cost structures for the serious professional.

Highlights:

  • Best margins for equity traders
  • Professional & best-in-class direct routing + Smart Routing Price Improvement
  • API for algo developers
  • Access to widest selection of markets
  • Free snapshot data
  • Powerful TWS/Mosaic software included free
  • Zero dollar & Commission plans for high volume traders

Considerations:

  • TWS software is complex to learn and is a general-purpose/jack-of-all trades and master-of-none type of software
  • TWS software has a dated look & feel
  • Snapshot data not suitable for active day traders
  • In the past, TWS versions changed frequently which can break third-party software which possesses significant risk to small futures trader.
  • New futures traders are, in my opinion, more likely to struggle trying to trade through something like TWS versus other software. For example, when I traded through TWS, granted many years ago, there were specific settings required to place stops at the exchange.

My Take:

Despite the incredible value, I do not think they are generally a good choice for futures day traders for several reasons. While their TWS software is powerful, it is not easy to use and looks dated compared to other software applications. TWS does have a “Booktrader” which is comparable to DOM on traditional futures platforms. In addition, IB offers free “snapshot data” which may be fine for swing day trading but is not suitable for active day traders or scalpers.

One valuable feature they do offer is an API for algorithms and support for third-party software like Multicharts. However, it has been my experience that there are more issues when trading over software that connects to systems that IB. The problems are often created due to differing release cadences and breaking updates.

In conclusion, I do not recommend IB for new futures traders, new traders, or traders who seek to day trade futures seriously. IB is primarily for the serious professional who is willing to learn their platform or for the trader who has hit limitations with other brokers and sees the clear value. For equities traders, IB does offer the best margin rates in the game which may be a consideration, widest selection or markets, and other benefits that differentiate themselves from others.

TD Ameritrade / ThinkOrSwim

Charles Schwab entered agreement to acquire TD Ameritrade late last year. TD Ameritrade is primarily known for their thinkorswim software which they acquired in 2009. Thinkorswim is generally known as the most powerful options platform for retail traders and, in addition, has the most comprehensive and out-of-box collection of technical charting indicators.

Highlights:

  • Thinkorswim is loaded with an incredible assortment of technical analysis, indicators, and charting tool. The value of the out-of-the-box indicator offerings is most impressive and something I think others should seek to imitate (others being NinjaTrader & Tradestation!!).
  • Easy to configure grid-based charting.
  • Free data for many futures markets and indices
  • Matrix/DOM for active traders
  • Most powerful options analysis tools
  • Options back testing (not tested)
  • Thinkback/replay service
  • Large selection of futures
  • TV/Video/News & Education
  • $0 Commissions

Considerations:

  • Software has been added to in a piecemeal fashion which presents as an overly complicated interface now.
  • Lag! While there are settings that can be configured to reduce the lag, the matrix generally lags severely compared to Tradestation or Ninjatrader or even Tradovate.
  • Thinkback, their market replay service often ended up crashing or simply not working all that well for me. It would be impressive if it actually worked.
  • Thinkscript, their scripting language, is not as powerful as NinjaTrader’s C# or Tradestation’s Easylanguage.
  • Generally, seems to be lacking serious backtesting tools like Tradestation & Ninjatrader have for futures traders.
  • Difficult to do something as easy as see my P&L.
  • Software/platform had troubles during recent market volatility while professional level platforms reported few issues.

My Take:

Despite the powerful technical analysis and significant value offering with the free data, I could not help but to feel it is a step back for the active futures trader. As such, I cannot recommend this brokerage/platform for the active futures trader because there are better offerings. I think this platform is probably better for the new trader, the technical trader who trades at a lower frequency, or the options specialist. On the other hand, it is worth registering just to see all the great indicators.

Charles Schwab

Charles Schwab caters to a wide group of traders and for active traders, they offer Streetsmart Edge which is strong in equity research. They do offer futures but don’t offer a ladder/DOM trading which is a requirement for most. Their registration process was the best I have ever seen. 

Highlights:

  • StreetSmart Edge for active traders
  • Strong in stock research
  • Many features geared toward options traders
  • Very slick & easy registration process
  • Simple but powerful trading platform
  • Leader in online banking separate from their broker business. Well worth reviewing for the perks.

Considerations:

  • No DOM/ladder
  • No API for programming orders
  • Reports they may try to steer you into higher costs managed services (not experienced)

My Take:

This is good platform for those traders who prefer simplicity or who want to do equity research, news, or mostly options trading. It may also be suitable for the less active trader with fewer demands. 

Fidelity

Fidelity is known for their price improvement algorithms, Active Trader Pro , and Wealthlab portfolio-level backtesting software. I was a user of Wealthlab before they were acquired by Fidelity and it would be a good program to get started with if not for the fact it is a basic non-starter: because you will need to maintain 25k and meet minimum trade requirements to be able to take advantage of it. In fact, in order to use their auto-trading feature, you will need to maintain $1,000,000 and worse they do not even offer futures trading.  

Highlights:

  • Wealthlab for qualifying accounts
  • Active Trader Pro
  • Claims to offer some of the best price improvements in the industry

Considerations:

  • High qualifying & very steep requirements for auto-trading through Wealthlab
  • Does not offer futures

NinjaTrader

Of course, NinjaTrader is the most extensible and open platform for futures traders. As a brokerage, they offer $500 day trading margins for the most popular futures contracts.

Highlights:

  • Supports the most powerful NinjaTrader software with powerful market replay, C# programming, backtesting, charting etc.
  • Futures, futures options, and FX trading offered
  • Span margins for futures options
  • $500 Day Trading Margins
  • Extremely competitive commissions
  • Limited multi-broker option* (support for IB, TD Ameritrade)
  • Free EOD data
  • Free software
  • Can support a daily loss limit — very important for discretionary scalpers
  • Power ATM strategies
  • Advancing charting 
  • Support for rolling contracts
  • Performance tracking and reporting

Considerations:

  • My biggest complaint is that NinjaTrader refuses to implement decent Windowing management capability whereas virtually all other platforms have a grid supported layout. It sounds trivial but the ability to quickly get your charts up and start trading is important especially for multi-market traders. At a minimum, they could offer the ability to save and restore where the windows were!  Virtually every other trading application has superior window management: compare to TC 2000, Tradovate, CQG web, etc.
  • Market Replay used to be a best-in-class offering but isn’t convenient as compared Tradovate’s nor does it offer bar-by-bar replay.
  • NT 8 DOM, while powerful, is overly bulky and is no longer a best-in-class offering. It does not look like it was made by a trader. Compare to FuturesOnline/OEC DOM, compare to CQG web trader DOM, compare to Tradovate– just many DOM’s are superior.
  • Multi broker for CQG/AMP is only for existing or grandfathered accounts.
  • Will likely to need to purchase data from IQ Feed/Kinetick for backtesting compared to Tradestation — in addition to real-time feed
  • Raised margin requirements recently during volatile markets. While understandable, I do not believe AMP changed theirs.

My Take:

While I have not used Ninja brokerage yet, as a futures trader I do not think you can go wrong with NinjaTrader. I have traded with NinjaTrader software and CQG connected to AMP– and it has always been a rock-solid platform. Something the small futures trader should not discount are the reduced day trading margins because even if you do not plan to put on that many contracts: if you have working orders out then you can easily eat up your margin requirements. And when that happens it can have bad effects such as your stop loss getting cancelled!  

AMP Trading

AMP is a discount futures brokerage, and I have had good experiences trading with them. I have traded primarily through NinjaTrader but they support a lot of other platform including CQG web. They are a great discount broker for the active trader. While they may not be as convenient as other brokers in terms of backend reporting, I have zero complaints on the trading side.  Unfortunately, they do not support a loss limit but you can create sub-accounts for managing risk.

Tradovate

Tradovate is a futures disruptor that offers 3 plans: membership free, active trader plan, and commission free membership.

Highlights:

  • Modern & slick online trading platform
  • Free plan with discount futures rates
  • Active trader plan for $99/month with further reduced rates
  • Commission free trading for $199/month prepaid annually
  • Tradovate platform features most-convenient Streaming Market Replay, grid-based charting, and modern web-based DOM ($49/mo or included with Active Trader Plan)
  • $500 Day Trading Margins for popular e-minis
  • Supports risk controls like daily loss limit for active traders– very important for discretionary traders.
  • Innovations in performance reporting

Considerations:

  • $15 fee for third party applications or order-routing fee applicable if using third-party applications.
  • Live market data not included
  • Limited third-party application support
  • Responsiveness was good but unlikely to be as good as desktop application like Tradestation or Ninjatrader.
  • Cannot program orders with the standard Tradovate platform
  • API access limited to partners

My Take:

While many may be attracted hearing their commission free membership, their Streaming Market Replay is  far superior in convenience compared to NinjaTrader’s Market Replay. In addition, their modern grid-based layout is very welcome compared to NinjaTrader’s “non-approach” to window management.

On the other hand, NinjaTrader platform as a whole is superior and far more powerful.  NinjaTrader only needs to make a few improvements by adding grid-based window management and a more convenient market replay to beat them from a technology standpoint.  While it has a lot of promise, my feeling is that serious traders are more likely to run into major obstacles with the base platform compared to Tradestation or NinjaTrader.  Moreover, while the commissions can certainly be an obstacle for very active futures traders trying to achieve profitability, the largest proportion of that is exchange fees which would still exist. 

This platform is certainly one to watch and that I will continue to research: but at least for now, I think most will still be served better by Tradestation or NinjaTrader.

Tastyworks

Tastyworks is the new brokerage founded by Tom Sosnoff who was one of the original founders of ThinkOrSwim. They are squarely focused on options and futures on options trading: while they do offer support for futures trading, as well. However, they have taken a different approach to the traditional ladder for futures trading which is, in my opinion, is not suitable for most active futures traders. They are a compelling platform for futures options trading, however. I like the simplicity and power for creating spreads and this would be a good choice for those new to options.

Highlights:

  • Simple yet powerful platform for options and futures options trading
  • No closing commissions on options
  • Capping for maximum commissions on multi-lot options orders
  • Free data
  • Basic charting
  • Options education
  • Can write options on small account
  • Stop/target orders on options trades

Considerations:

  • Some options teachings of questionable value
  • Futures alternative design ladder not suitable for most traders
  • Cannot chart options on the charts
  • No traditional matrix/DOM for trading futures or options (like Tradestation or Thinkorswim)
  • No quick order entry capability for options trading. Platform order process is too slow and cumbersome for trading options as directional products.
  • Charting is basic
  • No backtesting
  • Was unable to close a trade recently. However, I was able to find support@tastyworks.com email and received an immediate response.

Tradestation

Tradestation was one of the first backtesting platforms for futures and was generally a pricey option for the non-professional. Pressures have changed the equation with Tradestation now offering their Tradestation Select Plan with zero-dollar stock commissions, free platform, and free real-time data for stocks, futures, futures, options, and crypto!

Highlights:

  • TS Select & TS Go Plans
  • Free real-time futures, stock, and options data
  • Free access to most powerful Tradestation desktop platform!
  • Free access to Tradestation web platform
  • Tradestation Matrix is very fast compared to TD Ameritrade & can be used to Trade options
  • $0 stock and very good pricing on equity options
  • Tradestation desktop is arguably the most powerful platform for prototyping trading systems today! 
  • All Tradestation features included for free: Options Stations Pro, Portfolio Maestro, etc
  • Easylanguage for rapid prototyping and algo development
  • Great inclusive data for backtesting systems over long periods

Considerations:

  • Day trading margin rates are set to 25% of the exchange. Even if not planning to trade several contracts, having lower margins is very important when trying to work limit orders and for setting stop and target at time of entry because most systems will reduce margin for every working order– even closing & resting orders. 
  • Commissions for futures are going to be higher than discount futures brokers.
  • The free data option has higher commissions then their older plans where you pay for the data. Depending on how many markets you trade, how frequently, etc. may depend on what your best bet is.  For the non-pro’s CME bundled is only $20 per month– so if you primarily trade CME then it is probably worth paying for the data.
  • Tradestation platform is not as easy to expand as NinjaTrader.
  • Tradestation is leader in backtesting but lacks Market Replay and other NinjaTrader innovations.
  • While Tradestation is the strongest in EOD backtesting & simple bar backtesting, the platform has lagged behind NinjaTrader in terms of the types of event-based processing intraday systems need.
  • Many fees to watch out for! You can call your rep about reducing margin rates but you will have to watch it more closely then on something like NinjaTrader
  • Charting has generally not kept up with the times compared to NinjaTrader or Tradingview or Thinkorswim.
  • Few out of box indicators & less community support for custom indicators, tools, etc. 
  • Data and charting support for non-time based bars not as strong as needs to be
  • Cannot support risk controls or daily loss limits.
  • Manual contract roll over

My Picks:

It should be clear that there is a great deal of choice today and most of the top brokers have a particular appeal.  Below you will find my top picks. Be sure to comment your favorite broker & why or if you feel that I got anything wrong.

Best Overall: Tradestation

If I had to pick one broker / technology platform overall then I would have to pick Tradestation because they have a powerful easy-to-use platform, free data, and support all the major trading products. The platform is powerful enough for demanding professionals and still one of the easiest to use for new traders. Tradestation is fast and does not lag like TD Ameritrade’s thinkorswim. As such, this platform is going to be suitable for many active professionals and day traders. Plus, you have EasyLanguage and arguably the most powerful platform for building automated systems.

There are obstacles for active traders though. The higher commissions and the margin requirements have to be considered and taken into account. In addition, one reason I have made more tools & products for NinjaTrader is that NinjaTrader’s platform is more open. While I preferred Tradestation for rapid prototyping, I more often ran into limitations that I could not overcome as with NinjaTrader.

TD Ameritrade & Interactive Brokers would be close seconds in this category. Futures professionals might want to consider CQG or TT but they will tend to be too expensive for most.

Best Active Futures Day Trader: NinjaTrader+AMP or NinjaTrader with Ninja Broker

NinjaTrader is still going to be the best for very active traders because they have the community support, most open platform, lower commissions, market replay, etc.  I plan to continue to use NinjaTrader with AMP brokerage for my most active trading

I am a big fan of AMP because they offer a lot of value and the best rates. Plus, I have never had any order execution problems with them. In regards to the value, they offer free CQG web, a Tradingview, and other software support which increases the value proposition.  While a most basic platform, CQG web still manages to beat NinjaTrader in basic DOM and window management.

While I have not tried Ninja brokerage yet, it looks like a solid bet with their technology platform.

Tradovate is a contender in this category, and one that is worth watching. The real reason that NinjaTrader or Tradestation have to be considered the best platforms is they are the only futures platforms with the scripting and programming capabilities that are required. Tradovate, CQG Web, and other platforms have many user-interface improvements and some innovations but lack API and programming capability serious traders demand.

Best Options: Tastyworks or TD Ameritrade 

Best Stock Research: Charles Schwab or Fidelity

Updates 2021:

Unfortunately, Tradestation has had a lot of problems with slow order confirmation, platform freezes, and 30 minutes wait on trade desk. I have purchased Multicharts and am in-search of another broker.  Tradestation has good data for backtesting but my experience with them has been very poor.  

Do you know a good broker/software for algo backtesting better then what I have shared? Let me know.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.

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