Robinhood App Review 2017
Robinhood is a commission free trading platform for mobile devices only. They set themselves apart from the competition by making stock trading simple. Robinhood features a sleek and powerful interface that streamlines the buy and sell process of trading stocks.
While the app is in fact commission free, you'll have to pay for upgraded services such as their Robinhood Gold subscription. We'll dig into what Robinhood Gold is, how to use it, and why we love Robinhood for its singular focus on commission free trading.
Fees and Commissions
We already mentioned that Robinhood is a commission free stock trading app. It's really as simple as that. Commissions are the charges a broker, such as Robinhood, applies to the buying and selling of securities (stock). Many brokers charge from $6 - $12 every time you buy and sell!
SEC Trading Fee
When it comes to fees, there are a couple of fees that could catch you by surprise. One is the SEC trading fee which will cost you $21.80 per $1,000,000 of sold principal. I'm guessing most of you aren't trading in batches of $1,000,000 so don't worry about that.
This fee is not imposed by Robinhood but is actually a Federal agency (Securities Exchange Commission). This fee is universal across all brokerages but among the apps we have reviewed, users of Robinhood are more likely to encounter this fee than others. Learn more about the Trading Fee.
Trading Activity Fee
This fee called the "TAF" in Robinhood's paperwork comes out to $0.000119 per share of equity sale. You'll need to sell at least 42 shares in any given stock in order to incur a $0.01 fee. It'll take you just over 8,400 shares to incur a $1 fee.
I'm gonna take a wild guess and assume that none of you are trading that many shares. See a complete list of Robinhood fees.
This fee is administered by FINRA (Financial Industry Regulatory Authority) to cover its cost of regulating brokers. Again, we mention it here due to Robinhood users' higher likelihood of incurring trading fees as compared to more passive brokerages. Learn more about the Trading Activity Fee.
Robinhood Gold Pricing
I'm going to include this under "fees" since it's their only paid subscription service at this time. Robinhood Gold is essentially a margin trading account where you pay a flat monthly rate for a certain amount of margin buying power.
Am I speaking Greek to you? Let me put it this way: You pay Robinhood a monthly fee in order to be able to buy and sell shares of stock with money they loan you. You keep any profit above the monthly cost of the service.
If you don't fully understand what margin trading is or how Robinhood Gold works, we advise caution. Trading on margin can leave you in a position of actually owing money to your broker.
Margin calls can happen if you purchase shares of a stock on margin (with borrowed money). When the value of that stock drops below a certain threshold, Robinhood can require you to deposit enough money to cover it. Or they'll just sell enough of your shares to cover the cost. See our video on Robinhood Gold to learn more.
Available Promotions and Free Cash
We always include the latest promo codes and free sign-up incentives with each app review. In this case, Robinhood will give you a totally free share of stock, chosen at random, worth between $3 - $150 when you sign up with our link. If this article has been helpful to you, please consider using our link - the kickback we receive helps keep this site running.
If you want the in-depth article about Robinhood's referral system and how it's changed this year, check out our article that deep dives into the subject.
Account Minimums and Maximums
Robinhood does not stipulate an account minimum at present. However, there is a functional minimum imposed on your individual account. In order to use Robinhood, you must have sufficient funds in your account to buy at least one whole share of a stock.
Let's say that you want to purchase a share of Amazon stock (AMZN) today. You'll need $936.36 to do that. Because Robinhood only allows the trading of stocks and does not support fractional share trading like M1 Finance, you must purchase whole shares of stock.
Robinhood does not have an account maximum directly stipulated but if you're thinking about dropping more than a couple cool million dollars into your account, we'd suggest you contact them directly.
This is one of the review headings we always comment on for every app. Because it's an important feature for many small-time investors and traders we like to keep you in the know.
Robinhood, as we mentioned, does not support fractional shares. Fractional share ownership is something we support because it gives investors with small amounts of capital the ability to better diversify and hold shares of otherwise unaffordable stock.
Of course, Robinhood is an app that hinges on short-term individual stock trading. For this reason, their user base and the broker really have no incentives to offer fractional trading. If you're looking for this feature, Robinhood is not the place to go and that's okay!
We really like M1 Finance for fractional share ownership if you're seeking this feature.
Robinhood's biggest unique feature is the commission free trading structure combined with its accessible and intuitive interface. This makes it unique as the only commission free stock trading platform that can be easily put into the hands of millions.
Robinhood also manages to set itself apart by giving users access to advanced order types for free! This is wonderful as most low-cost or free trading platforms have limited order types. Of course, trying to trade stocks with only market order execution is very risky! That's why Robinhood offers:
- Market Order
- Market orders make a trade at the current market price when the trade executes. The price displayed when you execute the order can vary from the price that your order is actually executed at. Yikes!
- Limit Order
- Limit orders simply specify to Robinhood the maximum or minimum you're willing to buy or sell at. Obviously, this gives you much greater control than Market Order types in most scenarios.
- Stop Loss
- Stop loss orders will trigger a simple market order at a specified price to buy or sell. Once that price has been met, Robinhood will automatically trade your shares at market price.
- Stop Limit Order
- Stop limit orders are similar to stop loss orders except they put a maximum or minimum limit on the price you're willing to buy or sell at. Once your price has been met, the order will execute if the price is within a certain threshold.
We mentioned Robinhood Gold in the fees section but let's expand on its unique features here for a bit.
Robinhood gold is a margin trading account upgrade. You pay a set monthly fee (see above for a list of pricing) in exchange for increased "leverage" or buying power. What that means is that Robinhood will loan you money to buy and sell stocks with.
Like any loan, however, you're on the hook for collateral. If you buy stocks with Robinhood Gold and their price drops significantly, you may be facing a Margin Call. In this case Robinhood will notify you and give you a certain period of time to deposit funds to cover the loss, otherwise, they'll just sell your shares (at a loss) to cover their loan to you.
Margin trading uses leverage, or borrowed money, to multiply your ability to earn money when the market moves up. Unfortunately, it also multiplies your losses when the market moves down. Be certain that you fully understand trading on margin before participating in Robinhood Gold. It is not free money!
This free service is an "upgrade" from Robinhood but all you have to do is opt-in. You're granted access to use of up to $1,000 deposits and immediate withdrawal of funds from sales. Really what it boils down to is that Robinhood is lending you the money in advance of payment settlement so you can withdraw instantly and put deposits to work instantly.
In order to gain this power, your account will be converted to a limited margin account. Why? Because you're borrowing money to invest instantly while your deposits are settled, and borrowing money to withdraw instantly while your share sales are settled.
Limited margin accounts are, by and large, quite straightforward to understand. They will open you up to margin account regulations however, so be aware of that.
There is one exception to Robinhood Instant and that is when it comes to trading high volatility securities. Robinhood has basically forced every Instant user to accept volatility protection by forcing you to use funds from at least one day prior to buy and sell penny stocks and leveraged ETFs.
Don't know what that last paragraph means? That's probably fine because you should really understand what you're doing before you dabble in high-volatility day trading.
Short-term traders looking to buy and sell shares of individual stocks on a daily or weekly basis.
Because of the commission-free structure, Robinhood Instant, Robinhood Gold and the advanced order types available to all Robinhood users, this app rates extremely high for short term trading.
*Note: You will be flagged as a Pattern Day Trader by the SEC and be subject to regulation if you buy and then sell the same security within a 24-hour window four or more times within a five-day window. This includes an account balance requirement of over $25,000 to avoid a hold on your account.
Pros & Cons
- Poor education about margin accounts
- Poor charting & analysis tools
- Exposes users to technical regulation
- 100% Free for vanilla users
- Access to margin trading
- Access to instant settlement
- Commission free for all users
- Intuitive and accessible
Ultimately, I love that Robinhood is totally free for basic users. This can give new traders the ability to dabble without having to pay fees that would hamper returns. They do this better than any app on the market today, in my opinion.
On the flip side, however, I am truly worried about the lack of education. Unsuspecting Robinhood users are exposed to advanced and potentially disastrous trading concepts such as trading on margin which are wrapped in fluffy titles like "Robinhood Gold". I would like to see Robinhood require an in-depth training or vetting process before users are exposed to these advanced account types.
If you found our review helpful, please consider using our link to sign up for Robinhood. You'll get a free share of stock to start trading today which could be worth up to $150! Proceeds we receive are used to help this site keep making great content.