Robinhood started out as an innovative disruptor in the brokerage industry and its brand has since grown to be very popular with tech-savvy investors and new traders, thanks to a no-fee model and sleek, easy-to-use trading experience. Originally, the company’s biggest differentiator was fee-free trading; however, many competitors have since lowered their fees in response. Users can easily trade stocks, ETFs, and cryptocurrencies on the platform, but it lacks more sophisticated financial tools, asset categories, and research capabilities that advanced traders look for in a broker. While there has been a clear focus on improving access to a growing library of educational content and enhancing basic charting capabilities, there is still much work to be done before the platform reaches standards being set across an increasingly competitive landscape. We’ll explore Robinhood in more detail so you can determine if the platform makes sense for you.
- Very simple, intuitive trading experience
- No trading fees or commissions
- Fractional share trading and direct cryptocurrency access
- Solid cash management features and recurring investment functionality
- Limited investment offerings and account types
- Limited research and educational content
- Lack of transparency
Usability Robinhood’s app is very simple and user-friendly. Robinhood’s mobile-first approach to their trading experience makes it an easy choice for investors who prefer to trade from their phone. The web-based platform has a similar look and feel to the app. Traders will find the same types of orders, assets, and functionality from either version. The main menu is easy to navigate, with intuitive screens that let investors easily see their portfolio value and positions. The search functionality gives traders a good overview of a stock’s details, such as highs and lows, P/E ratio, and market capitalization. A news feed and composite of analysts’ rankings gives traders even more insight into a company profile. As you’re looking through a stock’s information, the “Trade” icon follows you as you scroll, allowing you to buy or sell just as soon as you’ve made a decision. Notably, Robinhood rolled out improvements to its charting functionality in August 2022, much to the delight of traders who have long requested changes. 5 New chart features such as moving averages let traders better visualize and analyze stock trends to make more informed investment decisions. Overall, the trading experience itself is excellent. However, there are still some limitations to how much you can customize the experience, as there’s not much you can do to further tailor the app to your preferences. The user-friendliness of the app is dampened, however, by the platform’s significant outages in February and March of 2020, which still linger in many traders' minds. 6 Trade Experience Robinhood’s trading experience is fast and easy to use, appealing to new investors in particular as it allows them to get up and running quickly. The sleek mobile app has a straightforward design that lets traders seamlessly enter, exit, and monitor positions. Robinhood’s focus on a simple functionally makes the platform more geared towards investors using uncomplicated strategies, regardless of experience level. Robinhood users get access to basic watch lists and stock quotes paired with charts, analyst ratings, and news. The improved chart overlays give investors a more comprehensive look into stocks and their positions. Beyond this, there’s not much in the way of in-depth insights and customization ability. Sophisticated traders will likely not find all they need to execute more complex trading approaches, even with the improvements to charting functionality. Mobile Trade Experience Robinhood is a mobile-first brokerage that aims to make trading simple, without complicating the experience with more in-depth features. It makes sense then that more complex trading tools and research options are largely absent from the mobile trade experience. For instance, no chart drawing tools are available on mobile and trades can’t be executed directly from charts. Order staging and simultaneous order entry options are also not available. More basic order types, like trailing stop orders and stop limit orders, are about the extent of what you’ll get through the app. Advanced traders will notice that conditional orders aren’t supported. That said, quotes from the Robinhood app do at least stream in real-time. 1Range of Offerings Robinhood’s range of offerings is extremely limited in that it only offers stocks, ETFs, options, and cryptocurrency trading. Robinhood doesn’t support mutual funds or fixed income products and you can’t trade commodities, forex, or futures. If you choose Robinhood as your broker, you can invest in: Stocks, long only. No short selling. Over 300 new American Depository Receipts (ADRs) were introduced in July, 2022. 7 Stocks worth over $1.00 per share with a market capitalization over $25,000,000 are eligible for fractional share orders. The broker offers both stocks and ETFs. 8 Single and multi-leg options Cryptocurrency: A range of coins are available to trade. As mentioned, no mutual funds, no fixed income, no futures, no forex, and no futures options. Non-Custodial Wallets: Robinhood is building a web3 wallet that allows customers to control crypto in a seamless, decentralized web experience. Currently, a waitlist-only option. 9 Stock-Lending: Announced in May of 2022, Robinhood users can lend out fully-paid stocks in their portfolio. 10 Order Types Robinhood has a limited number of available order types. A range of market and limit orders are offered, but no conditional orders are supported. Order staging is also absent. These limitations affect all types of investors since it meaningfully restricts trading strategies. Support for more sophisticated order types, like order-triggers-other (OTO) is important because they help traders navigate risk, quickly enter and exit positions, and take gains off the table. As a result, traders using conditional orders can spend more time analyzing the market and looking for their next move without having to watch current trades as closely. This is another sign that Robinhood isn’t meant for active traders. As far as tax optimization, tax lots are defaulted to first-in, first-out (FIFO) for all equities. You can change the default cost-basis method for your account or specify different tax lots for liquidation by contacting Robinhood customer support. Trading Technology The way a broker routes your order determines whether you are likely to receive the best possible price at the time your trade is placed. This best price is known as price improvement. Robinhood states that their trading systems are set up to automatically route your order to the market-maker most likely to give you the best price, based on historical performance. Robinhood reports that 95.53% of orders are executed at National Best Bid and Offer (NBBO) or better. The average price improvement is $0.0193 per share on stocks, but the company doesn’t report figures for options. 11 In terms of other trading technology, Robinhood gives you the ability to make recurring investments, which is a helpful feature. In keeping with its simplified approach to investing, Robinhood doesn’t allow you to perform backtests or offer a demo account. Costs Similar to most of its competitors, Robinhood does not charge trading fees. There are some other fees unrelated to trading that are listed below. All equity trades (stocks and ETFs) are commission free. No fees for options trades Trading on margin requires a Robinhood Gold subscription at $5 per month, which includes $1,000 of margin. Margin usage above $1,000 is charged 5.75% for Robinhood Gold members and 9% for non-Robinhood Gold members. There is a $100 account transfer out fee There are no domestic or international wire fees. There are no account opening, account maintenance or account inactivity fees. Check fees: $20 to send a domestic check overnight.