To invest in cryptocurrencies, a crypto exchange platform is a must. Since there are so many online platforms to choose from, it’s kind of frustrating to select one. If you have heard of Robinhood and are wondering if it has all the features and functions you need for smooth trading, you have landed in the right place. Here, we are going to review Robinhood comprehensively so that you can make the best decision.
What is Robinhood?
Robinhood is an online brokerage platform that offers easy trading from its website as well as its mobile application. It provides commission-free trading to traders but still generates an active income from payments for order flow. Payments for order flow is a practice where the broker receives a negotiable amount for compensation for directing orders from one party to another during trading. When it comes to Robinhood, they call this practice “rebates from market makers and trading venues”.
An independent analysis reported that the payments for order flow in Robinhood garnered them $69 million in revenue in 2018. And in 2020, Robinhood has gained around $180 million from payments order flow. But if you subscribe to their optional membership, you will have to pay a $5 monthly fee for Robinhood Gold and they will make an extra. The Gold membership gives you access to margin loans and investing tools.
That’s what Robinhood is about — it’s a simple trading platform for all types of traders. But that’s not what it is all about. Let’s dig deeper into Robinhood’s industry.
Robinhood is a part of the fast-growing fintech industry. The fintech industry is where various old and new investors have invested millions of dollars for banking, money management, etc. in the digital platforms. Robinhood first announced its intention of making commission-free trading and they made it the mission of their business purpose. To make transactions commission-free and making a profit out of it at the same time required to keep the operational and administrative costs low. By the end of October 2019, the brokerage industry had followed suit to offer the commission-less fee structures.
Today, Robinhood supports over 5,000 stocks that include exchange-traded funds (ETFs), Bitcoin, Ethereum, American Depositary Receipts (ADRs), and many others.
Commissions and Fees of Robinhood
Like Facebook, Robinhood is a free service that does not charge any amount from the users unless it is about Robinhood Gold. Facebook makes profits from collecting your data and selling ads — in short, Facebook ties up with marketers to make a living. In the case of Robinhood, instead of selling your user information and ads, they sell your order flow. Order flow refers to the right to fill your order and Robinhood sells that to the wholesale market makers. So, since Robinhood is selling your order flow, the platform is not totally free.
If you subscribe to Robinhood Gold, you will have to pay $5 per month. And in return, you will get access to Morningstar reports, Level II streaming quotes, and margin trading. If you join other broker platforms that are Robinhood’s competitors, you will have to pay a larger fee than that.
Moving on, let’s check out what are the main tools of Robinhood and how they can help you with your trading practice.
Trading Platforms and Tools in Robinhood
If you have not used an online trading platform before, you should start with Robinhood since it is specially designed for beginners. However, Robinhood may not be suitable for experienced traders. The trading tools and features in Robinhood are not adequate compared to other stockbrokers on the Internet. It offers charts but they are rudimentary and only come with four technical indicators.
More experienced traders go for TD Ameritrade, TradeStation, and other broker platforms as they offer more than 400 technical indicators. But if you are a beginner, you will love the simplicity and user experience of Robinhood’s interface. It comes with a recurring investment tool where you can automatically invest your fixed amount in dollars. And they let you invest periodically like once a week, and so. It also comes with a Dividend Reinvestment (DRIP) feature that you can enable on your account to reinvest earned dividends from stocks or ETFs.
But what about the research experience of Robinhood? Does it let you find out the trends easily? Let’s find out.
Robinhood’s Overall Research Experience
There are some research filters in Robinhood such as “people also bought” recommendations. They help you figure out and check through the basics of your trading such as market cap size, current prices, about the trades, and more. As discussed above, Robinhood has a very simple and easy-to-navigate interface, it does not appear with many features or complications. But if you join Robinhood Gold, you will avail of Morningstar research reports.
Generally, Robinhood gives you access to their Robinhood Snacks newsletter and podcast for free. Their editorial team keeps the users updated with daily trends and the market with easy and straightforward guides and content.
If you are using Robinhood for the first time, you might want to use their mobile application more than their web version. Let’s find out what the research experience is like in Robinhood’s mobile trading.
Robinhood’s Mobile Trading Experience
Robinhood is an easy-to-use trading platform, let it be its website or mobile version. It comes with various simple functions such as basic watch lists, basic stock quotes along with charts and analyst ratings, recent news, running Bloomberg TV, and a simple trade entry. You can automatically sync the videos across different devices. When it comes to its stock charts, you cannot modify them past its six default dates and the chart types.
If you can gather stock quotes from apps such as Yahoo Finance or CNBC mobile app, you can make the chart even better. However, it does not allow you to set custom price alerts for each stock.
Other Benefits of Using Robinhood
With Robinhood, you can trade cryptocurrencies, use stocks, ETFs, etc. Other than that, Robinhood provides the users with useful materials such as the Robinhood Snacks newsletter and podcast. Here, you learn about various trading techniques in the crypto industry and otherwise. They offer various articles, videos, webinars, etc. but all of them are beginner-friendly only. There is a Robinhood’s Learning Center where you can access so many articles about various topics and they have also launched a YouTube channel recently.
The new YouTube channel focuses on research related to trends and logical educational content. So, overall, Robinhood has some pretty solid areas where it attracts traders. But it has some cons too. Let us focus on its advantages a little more and then we will talk about the ways it falls short.
Seven Main Benefits of Robinhood Trading
Commissions and fees: Robinhood is focused on providing the traders with 100% free commission-free stocks as well as options, ETFs, and crypto trades. If you trade often and frequently in Robinhood, you can save much more money than the irregular traders. The biggest account charge of Robinhood is a $75 outgoing account transfer fee. It means, if you want to transfer your investment to another broker, you may pay $75. But you won’t have to pay anything for selling your investment or transferring the money to your bank.
Doesn’t have an account minimum: You won’t have to fund your account with a minimum balance to start trading. So, you can start trading immediately. However, you should definitely purchase the investment that you need to invest.
Fractional shares and recurring investments: Robinhood offers fractional shares to the users that indicate that you can pay the smallest amount possible for a portion of a share. And it does not matter what the full price of the share is. This helps people to buy as many companies as possible with as little investment they can afford. The recurring investment is connected to fractional shares. You can schedule your investment — monthly, weekly, or yearly along with the amount you want to invest. And Robinhood will initiate the investment automatically for you.
High-yield savings: It offers a cash management account that pays 0.30%. You can withdraw with your debit card from more than 75,000 ATMs. It also offers $1.25 million of FDIC insurance.
Easy to use: It’s easy to use. You can simply download the Robinhood app on your smartphone, sign up, and start with funding your account. Simply provide a few personal details, and everything will be done within minutes.
Streamlined interface: The Robinhood interface supports market orders, limit orders, stop limit orders, and stop orders on both web and mobile apps.
Advanced research offerings: The tools and features available in Robinhood offer analyst ratings, lists of top movers, earnings calendars, and links to earnings calls. Their features are mostly easy to use on the mobile app.
Pros and Cons of Robinhood
Let’s have a look at the pros and cons of Robinhood in a nutshell.
- There is no account minimum
- Commission-free trading
- Streamlined interface
- You can trade cryptocurrencies
- No retirement accounts
- There are no mutual funds of bonds
- Limited customer support
If you are an experienced trader, you can trade on TradeStation, TD Ameritrade, Interactive Brokers, or any of your favorite Robinhood alternative platforms. But if you are looking for a simple interface without complications and also want to trade cryptocurrencies, Robinhood it is. Since it is offering zero commission trading, casual investors can easily go with Robinhood other than anything.
Do you think Robinhood works out for you as a beginner or experienced trader? Let us know your opinion in the comment box below.