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Robinhood has Saved Customers over $1,000,000,000 in Trading Commissions

Robinhood

As of May 2018, Robinhood claims to have saved customers over $1 billion in commission fees. It has also grown to over 6 million users which is almost double the number E*Trade users.

If you haven’t heard of Robinhood, it is a free online trading and investing app. It charges no commissions and allows trading of Stockes, ETF’s, Options Contracts, and recently added Cryptocurrency. Robinhood offers and adequate amount of charting and data tools available as well. The Robinhood app gives a lot of power to trading and investing with a smaller amount of money.

Advantages of the Robinhood App

No Commissions for Trades

First off, Robinhood is a commission free exchange. This means that instead of paying $5-$10 in broker fees on each trade or paying for options contracts, it doesn’t charge anything. Now, Robinhood doesn’t allow for day trading without meeting several criteria. You have to have at least $25,000 in your account (uninvested) at the end of the previous day. You are fine if you day trade as little as 3 times in a 5 day period, but frequent day trading is not allowed without passing the $25k minimum criteria.

The biggest advantages of commission free trading is the power that you have with a smaller account. I turned $500 in to nearly $1,000 in just over 6 months. Currently, I took some big losses due to the volatility of the recent trade war politics, but I’m still up about 20% for the year. If I had to pay commissions for each trade that I’ve made, I’d likely have over $100 less in my account.

Options Trading

Options TradingOptions are where the majority of my money is made. Options contracts are a derivative based on a stock price. These contracts are leveraged at 100:1. This means that if you hold an option of a stock that moves $1.00 in price, the value of the option goes up by $100 (if the option is in the money.) While this is a very simplified explanation, you can see the power of the leverage available when dealing with options. Most options and options spread have built in maximum loss for the position allowing you to manage your risk. In my opinion, this makes options one of the most powerful trading tools available to retail trades. You can certainly lose money in options, but by properly managing your risk to reward ratio, options can be a great trading vehicle.

While I’ve read about a dozen books on trading options, there really is a lot to learn in how options are evaluated and how volatility will greatly impact the type of trades that you will make. If you are looking for a book to cover all of the basics and even dive in to a deeper understanding of the way volatility impacts the price of options premiums as well as understanding various evaluations (the Greeks.)


Once you  have a basic understanding of Options Contracts, I recommend some more advanced books to take your trading to an even higher level.


Cryptocurrency Trading

Cryptocurrency

Robinhood recently introduced cryptocurrency to their trading platform. They only offer the larger and more established cryptocurrency coins right now, but since you aren’t likley able to day trade cryptocurrenies, you are probably not looking to trade altcoins. While it’s a good platform to invest in cryptocurrencies, they can only be traded against the US Dollar and the cryptocurrency coins cannot be withdrawn to a cryptocurrency wallet. For serious cryptocurrency trading, I recommend a cryptocurrency exchange, like KuCoin as it has a huge amount of altcoins available, soft staking options (similar to dividends,) and trading BitCoin contracts on leverage through KuMEX.

Robinhood Gold – Better Research and Access to Margin Trades

Margin Trading

The Robinhood App also has a variety of premium features if you upgrade to Robinhood Gold at an easy price of $5/mo. As a Robinhood Gold customer, you have access to better market data and professional research. If your account has at least $2,000 you can trade on Margin. Margin increases both risk and reward and I don’t recommend it for the novice investor until you understand hedging and other risk management strategies. I generally prefer options trading to margin trading although there are great strategies available to margin accounts.

Free Stocks for Referrals

Gift

Robinhood gives a free stock to both the new customer and the referrer. While the stock given varies, if you do not currently have a Robinhood account, I recommend signing up via a referral link to receive the free stock.

Summary

While Robinhood is still a pretty new application, it has grown by leaps and bounds and is constantly adding to features making it a very great product for trading, especially with smaller accounts. By increasing your trading skills, you can quickly grow your Robinhood account to a substantial amount of money.

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