Review of Robinhood Trading
Robinhood was the first brokerage firm in the United States to offer $0 equity commissions. But today, most broker-dealers have the same trading fee. So just how competitive is Robinhood now? Our research is going to provide the answer.
Bulls Harp On...
Cryptocurrency trading. Robinhood is one of the few securities firms to offer this great service.
Apple Watch app. Another unique offering that’s not available at several prominent firms.
Zero per-contract charges on options. The broker has even eliminated assignment and exercise fees.
Bears Harp On...
Unrefined trading tools. A lot of features are missing.
Customer support lacks a lot. Many Robinhood customers have complained about the service they have received.
No cash management tools as of yet. Robinhood continues to promise a debit card...and continues to fail to deliver.
Robinhood offers the following investments:
- Exchange-traded funds
- Closed-end funds
- A small selection of over-the-counter equities
- Cryptocurrencies (7 are available)
The crypto offering piques some interest. Missing on the list, however, are futures, regular forex, mutual funds, fixed-income securities, contracts for difference, warrants, and precious metals.
Robinhood has been promising a debit card with FDIC insurance and high interest for as long as we can remember. It still has a waitlist for this program with no date as to when the banking service will actually be launched. At this point, we’ll believe it when we see it.
There are no paper checks at Robinhood, and the broker-dealer has no sweep program currently in place that can deliver FDIC insurance. Cash in a Robinhood account earns no interest as of now.
It is easy to link an external bank account to a Robinhood account for transfers because the brokerage firm has logos of all major banks pre-installed.
This has been Robinhood’s Achilles heel from the very beginning. In order to deliver zero commissions on every trade, the company has to cut costs somewhere; and this is one place it cuts.
There is no toll-free number at Robinhood; although it’s finally possible to locate the company’s phone number (650.940.2700). In the past, no one could find it.
The Robinhood website has no chat, either in AI or human format; and there aren’t many self-service features, either. There is a method of reaching out to the broker via the website at Robinhood.com/contact.
Robinhood has no brick-and-mortar locations, and we don’t ever expect to see any.
Robinhood offers individual brokerage accounts only. Don’t bother asking about trusts, custodial accounts, IRA’s, or 401(k) plans. The broker doesn’t even offer joint accounts.
Margin is available; and in fact, every new Robinhood account now is a margin account.
There are no account fees or minimums at Robinhood. The company does charge $75 to transfer an account to another broker.
The Cost of Trading
So it appears that Robinhood doesn’t offer very much. But what does it charge? Not much, either.
The broker promises that it will never charge commissions, and so far, it has kept that promise. All of the investments it offers are commission free, and this includes per-contract charges on option trades. Even assignments and exercises are free.
Using a live agent over the phone (if you can get a hold of one) to submit an order is free, too.
Robinhood Gold is a margin account on steroids. It costs $5 per month and comes with instant deposits above $1,000. (A regular account gets instant deposits below $1,000.) Gold also comes with Level II quotes and Morningstar reports.
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Managed Account Services
Our broker under investigation offers no financial planning services or investment advice of any kind.
A mobile app is available to Robinhood customers that functions on Android and Apple phones. It is not designed for tablets.
The software comes with charting, although it’s very basic. There are 2 display styles (line and candlestick), and no tools of any kind. A chart cannot be rotated horizontally.
During our analysis, we found both market-hours and extended-hours pricing. There is also trade data, such as volume, high and low numbers, and last trade price.
The platform also shows what other customers have bought at Robinhood. For example, on General Electric’s profile, Robinhood shows that traders also bought Westinghouse and Ford.
The order ticket on Robinhood’s mobile platform splits into two display choices: options and stocks. For options, the app will first ask you if you think the underlying instrument is going up, down, or sideways. Based on your answer, the software will offer short-term, mid-term, and long-term trade ideas. Some of these are multi-leg strategies like straddles and strangles.
The stock trading form provides 4 order types: market, limit, stop loss, and stop limit. Each limit order has to be specified as either market-hours only or day plus extended.
Robinhood’s app for Apple Watch delivers a watchlist, a small graph, and trade confirmations.
Robinhood’s site has a similar look and feel as the mobile app. There are two color themes, light and dark; and these automatically change whether the market is open (light) or closed (dark).
Charting on the website is a little better than what we found on the mobile platform. For example, a graph can be shown horizontally. And there are a few technical indicators. We found four of them—admittedly not very many of them, but they’re there.
One really unique feature is the ability to increase or decrease the size of the charting area vertically, which simultaneously increases or decreases the size of the indicator’s area.
The order ticket has one more trade type (trailing stop order) than the mobile app. And the extended-hours option is a little different, too. This time, a box needs to be checked to specify extended-hours execution.
Strangely, options can’t be traded from the chart space. Instead, you have to go back to the stock’s profile page and click on the “Trade Option” button. It is possible to enter a stock order from a chart.
Another weird thing about Robinhood’s derivative trading ticket is that only calls and puts are available. (On the mobile app, there are a few strategies.) And the calls and puts aren’t presented in normal chains. It’s not necessarily bad, but it is different.
As already mentioned, there are no mutual funds at Robinhood. But the broker-dealer does provide access to closed-end funds and ETF’s. Unfortunately, there’s not much of a screener for these products.
The best way to find ETF’s may be to go to the dashboard and scroll down to “Popular Collections.” Here, there are various categories of securities, such as “Video Games” and “Upcoming Earnings.” These are groups of stocks, but there’s an “ETF” tag as well.
Clicking on this last button generates a list of 500 funds. The results can be narrowed by market cap, analyst ratings, price change over a day, and current price. They can also be sorted by the same criteria.
As for closed-end funds, there’s also no screener for them, either. Finding the tag under “Popular Collections” may be daunting. It may be simpler to type in the URL Robinhood.com/collections/closed-end-fund.
A fund’s profile page doesn’t contain a cornucopia of information. We found information on P/E ratio, dividend yield, market cap, and earnings history. There are no trade recommendations or fund commentary from anyone.
Security Analysis Tools
Robinhood is known for cutting back on services, and this is one area where the broker doesn’t stray from convention. Sadly, there is no stock screener Robinhood customers can use. It is possible to go through the Popular Collections section mentioned earlier and find groups of stocks, such as technology or finance.
In the right-hand column, there are a few variables that can be manipulated to narrow down the results. One of these is price. There’s a convenient interactive price slider to quickly cut the choices down. The percent change in price can also be adjusted from 1 day to 5 years.
There is very little in terms of financial education on the Robinhood site. The brokerage firm does have a list of FAQ’s that many new customers will have.
Robinhood does not provide any third-party stock reports.
Trading Option Contracts
Option tools are also in short supply at Robinhood. There are no probability calculators, derivative screeners, profit-loss diagrams, Greek values, or other advanced tools.
On both the website and mobile app, traditional chains aren’t used. Instead, Robinhood uses its own system of displaying calls only or puts only. During our trial of the system, we found it easy to switch back and forth between the two choices.
The mobile app actually begins with a Q&A session centered around the user’s forecast for the underlying stock’s price. There are four icons: up, down, either, and sideways. After selecting one, the app will offer some trade ideas. These are:
- Buy a put
- Buy a call
- Buy a straddle or strangle
- Buy an iron condor
Surprisingly, the website doesn’t offer these multi-leg trades; although they can be manually built.
Now it’s time to look at what is perhaps the company’s most popular offering right now: cryptocurrency trading. To be exact, there are 7 coins available:
- Bitcoin Cash
- Bitcoin SV
- Ethereum Classic
Other coins, such as NEO, Zcash, and Bitcoin Gold have streaming data. The only time clients can’t trade coins is when the broker’s site is down for maintenance.
Robinhood does not support coin withdrawals, so if you want to withdraw your crypto holdings, you must first sell them, and then withdraw the cash. It’s also not possible to transfer coins into Robinhood.
While these policies aren’t the best, it’s a start. And the broker says it has plans for more coins in the future.
Robinhood does have a DRIP service for all eligible stocks and ETFs. There’s no auto investing in mutual funds. Maybe someday.
And now we come to how all of this compares to Robinhood’s rivals. Now that most broker-dealers offer some type of $0 pricing schedule, Robinhood has lots of competition.
Most firms do continue to charge per-contract option fees. These include big names like Fidelity, Schwab, and E*Trade. Firstrade is with Robinhood, not assessing per-contract fees.
Most securities brokers haven’t launched a crypto trading service. Some do offer bitcoin futures, but nothing more. TD Ameritrade is one example.
When it comes to software, Robinhood underperforms most brokers. WellsTrade is about as elementary as Robinhood.
While Robinhood doesn’t offer access to global stock exchanges, Schwab and Fidelity do.
Along with many other brokers, WeBull does offer Individual Retirement Accounts.
Mutual Fund Investors: Vanguard, Fidelity, and Ally Invest are good choices.
Individual Retirement Accounts: TD Ameritrade, which has a similar commission schedule as Robinhood, offers IRA’s with zero fees.
Beginners: Robinhood does have user-friendly software, which would be beneficial to new traders. However, it just doesn’t have the learning resources and customer support that novices need. We have to suggest Schwab, Fidelity, or TD Ameritrade instead.
Active ETF and Stock Trading: With a $0 commission schedule, plenty of stock and ETF resources, and a very nice desktop platform, we have to recommend Webull.
Long-Term Investors and Retirement Savers: Fidelity and TD Ameritrade offer financial planning services, branch locations, target-date mutual funds, and self-employed 401(k) plans. They get our approval.
Small Accounts: With no minimums, no fees, and no opening balance requirement, Robinhood would be a good pick. But then again, so would IBKR Lite, which has much better software.
Robinhood Review Summary
Although Robinhood is a major outperformer in the crypto category, it seems to falter in other areas. Better choices are out there. Zero-dollar commissions are no longer enough.
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