Thinkorswim ("TOS") is a really cool platform! It has some of the best analysis tools where you can trade all investment products from one location.
Most reviews show that people are really impressed with the features of the platform. They even offer Level II data feed for free! I don't know any other broker that currently offers this market depth feature at no cost.
The platform is free and there is no charge for data!
But wait, like the saying goes...there is no free lunch. What you need to analyze are the commission costs and your trading style. Check out my simple cost analysis below. I also provide a solution that other traders utilize to get most of the benefits without most of the costs.
As much as I love this platform there are two major drawbacks. See if it's right for you.
Asset Classes All
Ease of Use 4/5
Value for Money 5/5*
Customer Support 4/5
* The platform itself is free and is very robust so I gave a high ranking here; however, commissions can kill your account - check out cost analysis below!
Platform Cost - Free
Market Data - Free
Alright so the trading software doesn't cost anything and you don't have to pay for market data - so what am I fussing about?
Ask yourself, how many trades do you make per month on average?
TD Ameritrade (the broker for the thinkorswim platform) charges $10/trade.
What about other brokers?
To have the Interactive Brokers TWS platform "for free", two trades on thinkorswim would cover the monthly cost of TWS inclusive of market data.
To have the Tradestation ("TS") platform for free, you need to trade 5,000 shares in the month (about $32 in commissions). With Tradestation you have to pay for market data on top of this - so you have to see whether it is worth it based on your activity.
Cost of Platform measured in thinkorswim stock commission trades:
TOS - Free
TWS - Free after 2 trades ($20)
Tradestation - Free after ~4 trades(~$40)
(assuming you only use basic Level I data)
Ironically if you are any more frequent than a "buy-and-hold" investor, executing orders on this platform likely isn't a good option. Check out what I mean:
Let's say you are a swing trader doing about 10 stock trades a month.
Interactive Broker cost:
$10/month for trades + $10/month market data =
$10/month for trades + $100/month for platform =
Worst >> Best
TradeStation >> thinkorswim >> Interactive Brokers
$1,320 >> $1,200 >> $240
Winner: Interactive Brokers
Thinkorswim is going to cost you $80/month or $960 more per year compared to IB. But in this case, TOS is better than TS since with TS you will have to pay a platform fee for not hitting minimum criteria.
Let's say you are a swing trader doing about 10 stock trades a day.
Interactive Broker cost:
$200/month for trades + $10/month market data =
$200/month for trades + $5/month for Level 1 stock market data =
Worst >> Best
thinkorswim>> Interactive Brokers >> TradeStation
$24,000 >> $210 >> $205
Winner: TradeStation/Interactive Brokers
- 20 Trading days per month. I know there are a bit more days but you get the idea.
- You will trade more than 5000 shares to hit the TS minimum criteria and not incur platform charges.
Once you start using the TOS trading platform to do some serious day trading...you will find yourself paying TD Ameritrade a crapload. It'll cost you $24k in commissions for the year in this example!! ARE YOU KIDDING ME? While IB and TS is pretty much same cost with an immaterial $5 difference for the year.
And that my friends, is why the TOS platform and data costs are "FREE."
And this is the irony - this trading platform is not really economical for day trading.
The trading software is great but the cost of commissions kills you if you are actively trading. What some traders do, is that they have a TOS account to have access to the platform, however they execute their trades on a different system. TOS doesn't charge a minimum activity fee making this solution a viable option.
This works if you are not scalping as you have sufficient time to analyze on one platform and then execute on another. Your call!
I'll keep it simple - 2 MAJOR drawbacks;
The funny thing about this review is the dichotomy in my conclusion.
This platform is fantastic, it has great charting features and the analysis tools available are amazing.
Irony with thinkorswim - the platform has all the features you would want for a day trading platform but it is not great for day trading.
It does not have direct market access which is key for trading, otherwise the broker will eat at your account insidiously through slippage and slow executions against your favor. If you want to actively trade and not just buy and hold stocks, commissions will burn through your wallet fast. This is also why I don't bother reviewing the other big name firms like E-trade, Schwab, etc. since their commissions not only suck but their platform offerings are no where near what thinkorswim offers.
Potential Solution: Try out the platform with a free trial. If you really like it you can use it for analysis, its best feature. Then use a different broker like Interactive Brokers for execution since they are an industry leader in this along with low commissions.