Robinhood

4
Robinhood is a zero commission trading provider, with amazing web and mobile platforms and a range of US stocks, cryptocurrencies (mostly majors with some altcoins).
Trading Platform:
Proprietary
Max Leverage:
1:1
Instruments:
Stock, ETF, Options, Crypto
Regulation:
FINRA
Min. deposit:
$0
Open an account Read full review

Summary

Established in 2013, Robinhood is a US zero-fee/discount broker. 

Elite Currensea considers the company as safe and properly regulated brokerage for trading stocks (FINRA, the US Regulator, ensures up to $500,000 investor protection that includes €250,000 protection for cash).

Overall

Pros
  • Superb Mobile & Web Trading
  • Commission Free US Stocks
  • Fully Digital Account Opening
Cons
  • Available only for US & Aussie clients (circa 2019)
  • Limited Number of Assets
  • Mediocre Customer Support
  • Onboarding limited mainly to tier 1 countries

Fees

Pros
  • Commission-free US stock trading
  • No inactivity fee
  • No withdrawal fee
Cons
  • High non-US stocks fees
  • High financing fees (cost of leverage)

Trading Instruments

Pros
  • Stocks
  • ETFS
  • Crypto
  • Options
Cons
  • Stocks
  • ETFS
  • Crypto
  • Options

Account Opening

Pros
  • Fast Onboarding (fully digital)
  • No minimum account balance
  • Customer-friendly
Cons
  • Available only to US & Australia (circa 2019)

Deposit & Withdrawal

Pros
  • Free withdrawal
  • No deposit fee
  • Instant depo up to $1,000
Cons
  • No credit card d/w
  • No speedy alternatives to “instant deposit” option

Platform & Trading

Pros
  • Superb mobile & web UX & UI
  • Fast & Functional
Cons
  • No customisation

Customer Service

Pros
  • Great F&Q
  • Professional Communication
Cons
  • No phone support
  • No live chat
  • Slow

Research & Education

Pros
  • Well thought news feed
  • Customer-friendly
Cons
  • No analysis recommendations
  • Very limited set of analytical tools
  • No education
  • No demo
  • No video tutorials

Regulation & Safety

Pros
  • Regulated by reliable financial authority
  • Strong Investor protection
Cons
  • Privately Held

Full review

Established in 2013, Robinhood is a US zero-fee/discount broker. 

Elite Currensea considers the company as safe and properly regulated brokerage for trading stocks (FINRA, the US Regulator, ensures up to $500,000 investor protection that includes €250,000 protection for cash).

Fees

Let’s first go through the fess terminology:

  • Trading Fees occur when you trade (spreads, commissions)
  • Financing or overnight rates are charged when you hold your leveraged positions for more than 24 hours. Leveraged position means that you borrow money from the broker to trade.
  • Non-trading fees are withdrawal fee or inactivity fee, hidden fees. 

To put things in a proper context we compare Robinhood with the competing services.

Non-trading fees

DegiroRobinhoodXTB
Account feeNoNoNo
Inactivity feeNoNoNo
Withdrawal fee$0$0$0

Robinhood charges no hidden fees, so you can say goodbye to unnecessary withdrawal and inactivity costs.

Trading Fees

Robinhood does offer zero commission for US stocks, crypto and options trading. Will you want to endure in non-US stock trading, the commission become increasingly annoying.

Stock Fees

Robinhood $0 fee on US stocks makes it very attractive provider for investing and frequency trading. However, beware of up to $50 fee for non-US stocks.

Stock fees of a $2,000 trade

RobinhoodDegiroFreeTrade
USA$0$0.6$0
UK$50$2.4$0

Options Fees

Zero commission option fees apply here as well.

Finance Rates

The fees are affordable, but less exceptional than the industry leading providers. The rates differ depending on the amount you borrow (the higher the amount your borrow the less you pay). E.g. if you were to borrow 2,000, you’d pay 10$/month, which is ≈ 6% of yearly  financing rate. However, if you borrow $70,000 you rate would be $240/month, dropping to ≈ 4.1% of yearly financing fees,

Trading Instruments

RobinHood’s offer is limited to stocks, ETFs, options, and cryptos. Furthermore, these assets are mainly limited to the US markets.

Markets & Products General

RobinhoodDegiroFreeTrade
StockYesYesYes
ETFYesYesYes
ForexNoNoNo
FundNoYesNo
BondNoYesNo
OptionsYesYesNo
FuturesNoYesNo
CfdNoYesNo
CryptoYesYesNo

Stocks & ETFs

Robinhood provides access to around 5,000 stocks and ETFs. It is much less than at XM or DEGIRO. Plus there are only a handful of international assets. 

On the up side, unlike Degiro, Robinhood provides access to smaller (penny stocks, usually considered below $5 per stock) US Stocks. These are often more volatile – beware. 

RobinhoodDegiroFreeTrade
Stock Markets Unclear but US penny stocks available.323
ETFs5000540040

Crypto

Both mainstream coins (bitcoin, ethereum, ripple) and established alt coins (Stellar, Monero) find place on Robinhoods platform. 

The cryptocurrency offering may vary depending on your country and state.

Account Opening

Taking up to two working days, the account opening is seamless and fully digital. Unfortunately, Robinhood is only available in Australia & USA (circa 2019). 

Min Depo

There is no requirement for a min depo, the Robinhood Gold account starts at $2,000 deposit

Account Types 

After onboarding you automatically become a Standard/Instant account owner that can later be downgraded and upgraded to Cash & Gold accounts respectively. 

  • Standard/Instant 
  • Cash 
  • Gold 
CashStandard/InstantGold
?Unlimited Day TradingInstant Depo of up to $1,000
  • Instant Depo of up to $5,000
  • 1:2 Leverage 
  • Extended trading hours 
?
  • No Leverage
  • Up to 7 days to transfer funds
  • Limited Day Trading
  • No leverage 
  • Limited Day Trading

Three main differences between the accounts are leverage (“buying power” in robinhood’s lingo) and day trading limitations.

Buying power allows you to trade with up to 1:2 leverage, meaning you can open position double the size of your account. This feature is only available to Gold account holders.

Day trading restrictions are trickier, both standard and gold accounts allow only for up to 3 day trades. If you go over the limit, your account will be locked for 90 days. 

The only way to overcome the obstacle is to have over $25,000 on your account. Surprisingly, on the cash account you may conduct as many day trades as possible.  

Instant deposit is not available to Cash account holders, hence you might way up to a week to start the trading activity. 

How to open an account at Robinhood

Taking up to 10 minutes the account opening reminds us of onboarding for a digital bank (bunq, revolut, n26).

Paperwork requirements

  • Legal Age 
  • Social Security Number 
  • US/AU Residency or Visa
  • Proof of Address

Deposit & Withdrawal

Seamless experience coming at the expense of only being available through wire transfer.

The funds wiring takes no time if you use instant deposit (standard account users are limited to $1,000 & Gold to $50,000 – the funds beyond the limit will be available only after 5 business days), whereas in other cases (cash accounts) it might take up to a week.

Base currencies vs similar brokers

RobinhoodDegiroFreeTrade
Number of base currencies291

Deposit options

RobinhoodDegiroFreeTrade
Bank transferYesYesYes
Credit/Debit cardNoNoNo
Electronic walletsNoYesYes

Withdrawal fees and options

RobinhoodDegiroFreeTrade
Bank TransferYesYesYes
Credit/Debit cardNoNoNo
Electronic walletsNoNoNo
Withdrawal fee$0$0$0

Trading Platform

One of the most well designed & user-friendly platforms on the market

Both web and mobile experiences, despite the lack of customization, offer a robust trading experience. 

User Experience & Functionality

The web platform was released after the mobile version, offering a basic set of features that are clear cut and doesn’t leave the core functionality to a blind eye.

Search function

It’s easy to find your way around the instruments, with no surprises and all of it logical and clear cut. Side by side comparison makes it really easy to do basic comparison analysis. Another plus, is a tag system, e.g. you could by clicking on “cannabis” tag, you will only see stocks from that niche.

Placing orders

You can select from most popular order types. Beware, not all order types are available for every asset.

  • Limit
  • Market
  • Stop loss
  • Stop limit

If you are not familiar with the basic order types, we recommend that you read about these order types.

You can also use two other order terms:

  • Day
  • Good-till-cancel (GTC)

Despite the comments about the prices you get, traders looking to buy stocks for longer timeframes, shouldn’t be concerned. To make up for occasional absence of the best prices, Robinhood offers zero commission. 

Alerts and Notifications

The following notification will be available:

  • Dividends payments
  • Price movements
  • Money transfers
  • Earnings announcements
  • Corporate actions (stock splits, mergers, etc)
  • Orders

Portfolio and Fee reports

Ready to read and clear reports show return on your stocks and average costs. Basic pie charts are available to have a basic overview of your portfolio.

Customer Service

Albeit a professional approach, the replies might be a slough (slow). No phone or live chat support is available. 

Despite growing rating on sites like FPA & Trustpilot, Robinhood is still trying to catch up on this aspect of the business. Replies might take several days, and not all info is readily available through the app or website.

Research & Education

Not really the solution you would want to use on the top of your research game. On the up side, news feed and fundamental data are relevant and general flow of information is well designed. 

Surprisingly, features like “price paid, collections and analysis ratings” are only available to web version. 

Recommendations

In the paid price section, you would find the info on the average price paid per stock by robinhood users. You can also benefit from buy/sell analysis rating, a feature native to TradingView and alike. 

Charting

User tradingview for charting – robinhood only offers the price movement. 

Fundamental Reports

You’ll find basic company info is available for majority of the companies (mobile & web). 

Other Research Tools

You can use filters to sort companies based on parameters like price changes, market cap, etc. 

News Feed

Finally, there’s news provided by yahoo finance, seeking alpha and alike. Robinhood, seems to try to make it simple for people to have a quick catch up on the news and click the buy/sell button (to see how robinhood makes money go to the bottom of this review). 

Regulation & Safety

Despite really little public info available, regulated by FINRA, Robinhood guarantees up to $500,000 investor protection and is well covered in the media. 

How are you Protected with Robinhood?

Protection by Financial Industry Regulation Authority, and SPIC (US investor protection body) entitles investors to $250,000 cash protection and $500,000 overall protection. 

This does not apply to the crypto offering. There is also no negative balance protection at Robinhood.

Background

Robinhood was established in 2013, which means the company has gained experience in the financial industry and should possess what it takes to stay competitive in the changing financial landscape. 

What You Should Also Know

You are probably aware by now, that such a thing as “free value” does not exist. This being said, Robinhood is still capable of providing commission free trading, however, it comes at the price of charting tools, education, analysis, and prices, as well as the lack of important features you’d find elsewhere.So how does Robinhood makes money? You see, not making money on the commission’s turns you, the client, into the product. Robinhood, offers your orders to market makers – which could sometimes lead to less favourable prices. 

Robinhood counter argues  this notion – Vice President of Product Josh Elman says, “We send your orders to the market maker that’s most likely to give you the best execution quality, which includes price improvement.” 

However, the price improvement statistics reported by investopedia.com used for this review were much lower than the industry average. 

The company makes money through marginal interest and lending, premium accounts and rebates.

The premium service cost $6/month and providers up to $1,000 in financing fees – allowing to use more cash for position than available through personal funds.  

Furthermore, the company makes money off of marginal interest and margin lending. According to Robinhood they make money through: “interest from customer cash and stocks, much like a bank collects interest on cash deposits” as well as “rebates from market makers and trading venues.” 

Robinhood reportedly makes over 40% of its revenues from high-frequency trading and order flow payments. 

This allows Robinhood to make money from processing the trades through the third parties that provide the other end to the trade, instead of going through an exchange. Citadel Securities, Two Sigma, Wolverine, and Virtu are among the third party liquidity providers, disclosed by Robinhood in accordance to the SEC Rule 606.

Robinhood Brief Overview

? Country of regulationUSA
? Trading fees classLow
? Inactivity fee chargedNo
? Withdrawal fee amount$0
? Minimum deposit$0
⏰ Time to open an account1 day
? Deposit with credit cardNot available
? Depositing with electronic walletNot available
? Number of base currencies supported2
? Demo account providedNo
? Products offeredStock, ETF, Options, Crypto

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