Robinhood App Trading Guide (Everything You Need to Know)

 

 

Robinhood is a broker-dealer app that allows users to trade stocks, options, and ETFs with zero commissions. You can also buy and sell cryptocurrencies on the Robinhood App. Robinhood allows users to trade cryptocurrencies such as  Bitcoin , Ethereum and Litecoin.

Since Robinhood does not charge any trading commission, it is much easier for novice traders to learn how to make money. The second advantage you have is that there is no minimum deposit requirement to start trading with the Robinhood App.

You can start investing with the Robinhood App with any amount.

The downside is, they don’t offer any tax-sheltered accounts like IRAs or other types of retirement accounts. Another downside of Robinhood is that they currently don’t offer automated trading features.

You can trade the following instruments on the RobinHood App:

• Share
• ETFs
• REITs
• Option
• Electronic money

RobinHood was the first brokerage account to introduce $0 commission trading. Usually, when you start trading stocks, a stockbroker will charge you $5 to $15 to buy shares. . When you want to take profits and sell, the stockbroker will charge you a fee. This is not the case with Robinhood.

The Robinhood app also allows users to trade on margin through Robinhood Gold, their premium account class. Their commission free model and wide range of tradable instruments have made this app experience rapid growth in 2019.

Now let’s answer another question many new traders aspire to have:

Is Robinhood safe?

Is Robinhood Legal?

 

Is Robinhood Legal? Is the Robinhood app safe? These are legitimate concerns that any individual investing in the stock market may have.

You can trade with confidence because your money on RobinHood is protected by the Securities Investor Protection Corporation (SIPC) up to $500k for securities and up to $250k for cash claims.

In addition, Robinhood is also regulated by the Financial Industry Regulatory Authority (FINRA), making Robinhood safer to use. So, in terms of security, investors’ funds are very well protected.

Because Robinhood is a stockbroker, it needs to be regulated by financial regulators in the United States, specifically the Securities and Exchange Commission (SEC). In addition to being regulated by the SEC, Robinhood has other secure procedures to protect your hard earned money and private data.

While opening an account with Robinhood is different from a traditional stock brokerage account, they are still required by law to collect certain information from their clients. This includes transactional activities and tax information. To file informational tax forms, you need to give them your Social Security Number (SSN).

But the app doesn’t come without its perils.

Trading on the go and being an inexperienced trader can be a recipe for disaster. This is really the only danger that the RobinHood App possesses. This is because it boasts the most loved investment app by millennials. And, we know many Millennials still lack the financial literacy to be a successful stock trader.

The good news is that the app itself is very simple and easy to use, even for new stock traders.

Next, we’ll give you a basic idea of how Robinhood works.

 

 

See below:

How does Robinhood work?

 

 

Robinhood works similar to any other broker stock and options online . You follow the same standard procedure:

• First, you submit your application form to open an account with Robinhood.
• Second, you transfer money to your RobinHood account.
• As soon as the money hits your Robinhood account, you can start buying and selling stocks, options, ETFs and cryptocurrencies.

 

 

If you’re not familiar with the slick Robinhood interface, you should know that they offer different ways to buy stocks. In the next section, we’ll show you an example of how to buy and sell stocks on Robinhood from the convenience of your smartphone.

Using an investment app can be intimidating and intimidating, but it’s actually pretty easy

Buying and selling stocks on RobinHood is as simple as these 7 steps:

1. Download the RobinHood app.
2. Search for your favorite stocks, ETFs or cryptocurrencies.
3. Click the Trade Trade button.
4. The next page will give you the option to buy or sell. Click the Buy Buy button.
5. Select your Order Type from the upper right order and the number of shares you want to buy.
6. Confirm your order.
7. Swipe up to submit your order.

Pro Tip – To be as efficient as possible, you can create a watchlist for quick access to your favorite stocks.

Don’t forget to read our guide where we broke down the general principles and the best way to choose stocks to day trade: Best day trading stocks with mountains of cash.

Now let’s talk about something more controversial, how does Robinhood make money?

See below:

How does Robinhood make money?

 

Can a stockbroker make money without commissions and offer free stock trading?

It seems that RobinHood has attracted investors and still earns revenue from a variety of income streams. Moving forward, we will outline how RobinHood can afford you commission-free trading and still make money as a company.

The way Robinhood makes money is actually very transparent. All revenue sources are listed on their website. The RobinHood app does not charge trading fees like its competitors E*TRADING or TD Ameritrade. But Robinhood makes a profit from the following income streams:

• Premium account. Robinhood Gold is a premium feature that allows margin trading and other benefits.
• RobinHood Gold starts at $5 per month.
• Margin interest. Like any other stockbroker, RobinHood earns interest on clients’ cash, in the same way banks collect interest on deposits.
• They charge $10 for any transaction made through a phone call.
• They can also assist in buying foreign stocks for around $35 – $50.
• Payment for the order line. This is a common practice in this industry.

Again, no hidden fees RobinHood! Now, you could argue that selling the order line for high frequency trading (HFT) could lead to filling your order. Your order to buy shares may be transferred to these HFT companies before being routed to the physical exchange. This, in turn, can lead to a worse filling of your order, so it is considered a hidden cost in trade execution.

But, everyone in this business most likely sells your order to these HFT companies before transferring it on the exchange. So there is no escape from this practice. You have to get used to it and accept it as a way of doing business.

If you want to learn how high frequency trading works, check out our HFT guide HERE .

 

Since we are followed by many traders, let’s touch on another topic that we are sure some of you will appreciate. Specifically, we will give you a quick guide on how to trade options on Robinhood.

See below:

How to trade options on Robinhood

 

 

Before you buy and sell options on RobinHood, make sure options trading is unlocked on your Robinhood account. Depending on your experience level, you are assigned Level 2 if you are a new trader and if you are assigned Level 3 if you know how to execute more complex options strategies.

With a level 2 designation, you can execute the following options trades:

• Buy Calls and Puts. Learn how to buy Put and Call options by following the step-by-step guide on How to Trade
• Stock Options for Beginners .
• Calls are covered. Become a smart options trader with this covered call strategy .
• Puts sack of cash.

Opening options trading on RobinHood is as easy as following these three simple steps:

1. Tap on the magnifying glass and search for your favorite stock that you want to trade options on.
2. Tap Trade in the lower right corner of the security’s Details page.
3. Tap Trading Options.

 

(Click on image to enlarge)

Please check out the different options trading strategies in our Optional Investment Strategy Guide .

Final Words – How to make money on RobinHood

For a certain type of stock trader, the RobinHood App might be the best stock trading app. However, just because the barrier to opening a RobinHood account is so low, you still need to do your own research if you don’t want to lose your hard-earned money. Before you hit the buy button, follow our guide on how does Robinhood work?

Get Free Stocks With Robinhood

If you open a new account today, you can open one now and get a free stock by opening an account with this link.

Although we have given you several reasons why  RobinHood is legit , this does not guarantee that you will always earn money. But you know that your money is secured and that you trade stocks through a trusted trading platform.

If you have no problem with how does Robinhood make money?and you enjoy the convenience of trading through your smartphone go ahead and do your free stock trade today.