Pros and Cons of Trading with Commission-Free Broker Alpaca

Alpaca Trading

 

Alpaca Markets offers trading that is quickly gaining popularity because it does not charge a commission for selling or buying stocks. It is focused on API trading and allows investors to easily use artificial intelligence, trading bots and algorithms in their trading and investing activities. But is Alpaca worth it? Here are the pros and cons of using the Alpaca trading platform.

 

PROS

  • It does not charge a commission for stock trading on its platform.
  • It also does not charge a fee for data. Alpaca currently offers two options for data. One is an integration with Polygon and another with Alpha Vantage.
  • Alpaca is a member of the Securities Investor Protection Corporation (SIPC) and is regulated by the Financial Industry Regulatory Authority (FINRA). SIPC offers fund protection of as much as $500,000 per customer.
  • Alpaca API is very easy to use because its API is similar to APIs used for trading cryptocurrencies and other investment instruments.
  • It does require a minimum deposit for a live personal account and requires a minimum deposit of $30,000 for business accounts.
  • Alpaca offers WebSockets which provides traders and investors an efficient way to get order and account information. It also provides streaming data for live accounts which eliminates the need for traders to regularly check price data.

 

CONS

  • Live accounts are currently restricted to U.S. clients.
  • Alpaca offers only U.S. stocks and does not offer futures, options or Forex.
  • It does not directly offer historical trading data and relies only on third-party data providers.
  • Alpaca makes money from interest on cash balances, their rate is a bit higher than some other brokers.

 

Alpaca appears poised for growth because of its commission-free trading and its focus on API. But it needs to expand both its offerings and its market range outside the U.S. For traders, it is important to ensure that additional costs associated with interest on cash balances and payment for order flow will not offset the potential savings from commissions.

 

If you’re interested in learning more about Alpaca, check out the following two articles:

  1. Alpaca Trading Review – Pros and Cons – An in depth review of the broker
  2. Alpaca Trading API Guide – A Step-by-step Guide – A guide on using Python to start automated trading with Alpaca

Both of these articles are posted on algotrading101.com which is an excellent resource for those interested in automated trading.