Robinhood Stock Trading App Review [Plus Tutorial]
Trading stocks is now simple… and affordable?
Stock brokerage firms can charge up to $10 per trade, which isn’t much for those who make trades in high volume. However, new investors tend to have lighter pockets, so the fees make a difference over time. But now we have Robinhood, a tech startup that has leveled the playing field in the stock brokerage industry.
Here’s a layout of what will be covered in this post.
- A brief overview of Robinhood and how it works.
- How the company makes money without commission fees.
- Reasons not to use the app to trade stocks.
- Reasons to use the app to trade stocks.
- A mini tutorial with screenshots to show the app in action.
So what exactly is this tech startup that’s changing the game in stock brokerage?
Robinhood is a mobile app to trade stocks, in real-time, with zero commission fees.
Below is a short promo video from when the app first launched on iOS in 2015 (the Android version came out in 2016). It does a solid job of explaining the general purpose of the app.
Plus, the design is extremely user friendly. It’s sort of puzzling how all of the data, charts, and news are compiled into one spot, yet the app feels simple to navigate. Kudos to the designers on that one.
After growing its user base to over 2 million active users by April of 2017, Robinhood is now valued at $1.3 billion.
But wait, how does Robinhood make money?
Personally, I wondered how the heck this business model worked, since there are no commission fees. But surprisingly, it’s quite simple.
(NOTE: There is a ‘Gold’ feature that includes an additional charge, but it’s optional and not necessary to buy and sell stocks.)
Aside from the optional ‘Gold’ feature, here’s how the business model works.
The company earns revenue by collecting interest on the funds in Robinhood accounts that are not currently invested in stock(s).
For example, let’s say Rick downloads the app and deposits $100. Rick wants to invest in company x, which is trading at $95 per share. So when Rick buys a share from company x, he now has $5 left in his account. And if Rick decides not to buy a cheaper stock with his excess funds, then Robinhood will collect interest on those funds while they sit in Rick’s account.
Of course, there are a ton of users that net little to no revenue for Robinhood, but that’s fine. The app has over 2 million users, and that number is growing quickly. This business model is based on leveraging the power of tech to scale user growth — as opposed to leveraging brick and mortar locations with stock brokers to provide consultations.
Think of Robinhood as the Amazon of the stock brokerage industry.
Robinhood is NOT an app for pattern day trades.
The app is powerful and informative, but in my opinion there’s just not enough tools for those who need to constantly follow data patterns to execute day trades on a consistent basis.
Think about the seasoned vets on Wall Street, for example. Those who are down in the trenches from bell to bell — those who are buying a multitude of shares when a stock dips, then selling the shares within a matter of minutes, perhaps seconds, once the stock price goes up.
It’s not for them.
Robinhood can be used that way by whoever wants to use it for constant day trades, but it’s not something I recommend using it for. There’s too much going on to track on a mobile app for those who buy and sell stocks multiple times per day, but that’s just my opinion.
Robinhood is for simple, informed investments, without the extra fees.
It’s pretty clear that Robinhood’s target demo is stock market virgins. In fact, 30 is the average age amongst their users. But people from other demos can use the app to their benefit as well.
Robinhood is great for those who purchase stock(s) with the intention of holding share(s) for at least a few days — if not weeks, months, or years. The app makes it simple to make informed investments, without having to pay a commission fee. Plus, it’s enjoyable to track how your stocks are performing, as the app is quite engaging.
Like the previous section, keep in mind that these words are just my opinion.
Let’s take a look at the app in action.
Here’s a mini tutorial on how to buy and sell a share of stock on the Robinhood app. As we go through, I’ll point out some of the cool features that we can leverage to make educated decisions.
First, let’s take a look at the app’s home screen once we sign in.
Robinhood app home screen.
A nice, clean display of how our stock(s) are performing will appear right as we sign in.
As you can see, there are filters below the line chart to display daily (1D), weekly (1W), monthly (1M), quarterly (3M), annual (1Y), or all time data. And below the filters, there’s a news feed of posts around the industry that pertain to the stocks we own, as well as the stocks on our watchlist.
Also note, this screenshot was taken outside of trading hours, which are Monday to Friday from 9:30 AM EST to 4:00 PM EST. When we are in the app outside of trading hours, the background is black; and during trading hours, the background will appear white.
We can still place trades into our queue outside of trading hours, which will be submitted during the next available trading period. Let’s scroll down so I can show you how to buy a stock on the Robinhood app.
Select a stock.
As we scroll down, there’s a list of the stocks we currently own shares of — with the stocks on our watchlist found right below.
Also, before we move forward, notice the search icon in the top right corner. That’s where we can search companies we are interested in. But for this tutorial, let’s say we want to take a closer look at the stock at the top of our watchlist, GoPro (GPRO).
View data chart.
Once we click on GPRO, this screen will appear.
Now in the top right corner there’s a circle with a check mark filled in. If we had searched for a stock that was not on our watchlist — once clicking on the stock, we would see the same circle with a checkmark, but it would not be filled in. If we want to add that stock to our watchlist, then all we do is tap the unfilled circle to add it to our watchlist.
I wanted to toss that info nugget in, since it might be helpful if you choose to download the app. But now let’s take a look at another data chart to see what GPRO stock looks like once we zoom out.
Zoom out to view different line charts.
That looks rough. However, on the bright side, it looks like shares have been trading sideways for a while after the stock took a nose dive early on this year. That’s good, because it’s a decent indication that there’s not much more room to fall.
Let’s scroll down to see if we can find some more info before we make an uneducated decision.
Check out recent news.
As we scroll down, we see a curated news feed of recent content that’s relevant to GPRO.
Check out more data and key metrics.
As we scroll further, we find some more data that we can factor into our final decision.
Keep going — there’s more info!
See previous and upcoming earnings reports.
Here we see a display of expected EPS (earnings per share) and actual EPS for past earnings reports.
It looks like GPRO has an earnings report coming up tomorrow. Stocks tend to be more volatile on the day a company reports earnings — whether positive or negative. This can mean it’s a great time to buy a stock, while it can also mean it’s a bad time to buy a stock.
Our decision will depend on our risk tolerance, as well as our research.
Order history and info about the company.
Here’s the bottom of GPRO’s stock profile.
As you can see, I already made a buy and sell transaction of GPRO, which was for this tutorial. But I forgot to take screenshots for some important steps, so here we are.
Anyways, let’s say we perform some more research on GPRO, and we decide to buy it. So in that case, we just scroll back to the top and select the ‘BUY’ button.
Enter quantity or select order type.
Once we have selected ‘BUY’, a screen like this will appear.
This next part is optional, but I like to select ‘Order Types’ in the top right corner.
Order type options.
A list of the different types of orders we can place to buy share(s) of GPRO will appear.
Now we select ‘Limit’.
The automatic order selection on Robinhood is ‘Market’, which means we will pay whatever the market price is at the time our order is finalized. We would likely pay $8.05 for our order, regardless, since we are placing the order after hours. This is more so something we would do if we were in regular trading hours — especially if we are buying [or selling] stock in bulk.
For example, say we want to buy 100 shares of GPRO at its current price of $8.05 per share, so our order should be a total of $805. But instead, we use the automatic ‘Market’ order type. If we happen to get a bit unlucky and GPRO shares surge by $0.05 in the few seconds it takes to place our order, then our order will be placed for a total of $810.
It all adds up, that’s why I like to choose ‘Limit’ orders to assure I don’t overpay.
(NOTE: To keep it simple, we won’t go through all of the order types right now — we will just place the standard ‘Limit’ order.)
Set a price.
We enter the limit price we are willing to pay for a share of GPRO.
Now press ‘Continue’.
Choose an amount of time we want our order in force.
Next, we choose how long we want our order to be in force.
As an example, let’s say we are only willing to buy GPRO if it drops to $5.00 per share. It’s highly unlikely that it will drop that far in one day. So in this case, we have the option to place an order that ‘Never Expires’ — which just means it will be placed in our queue until the order is submitted. Otherwise, we can make it active until one of two things happen — until our order is filled, or until we cancel the order.
Since I’m fine with paying $8.05 for a share of GPRO, I’m just going to leave it at ‘5:00 PM Tomorrow’ and select ‘Continue’.
Set the amount of shares.
Now the app takes us back to this screen to enter the amount of shares we want to buy.
Once we enter the amount, press ‘Review’.
Submit the order.
All we need to do here is swipe up from the bottom.
Pretty much done.
Now we see our ‘GPRO Order Pending’.
Order is placed into our queue.
Now if we go back to the GPRO stock profile where we started, as we scroll towards the bottom, we now see our GPRO ‘Limit Buy’ order placed into our queue.
The order should be placed as soon as trading hours start tomorrow.
And that’s how you buy a stock on the Robinhood app. Now let’s sell it.
There it is, our share of GPRO right below FB towards the top of our portfolio, and it’s in the green! It looks like we’re going to collect some profits in our next section of the tutorial, as we go through how to sell a stock on the Robinhood app.
View performance of our new stock.
We open GPRO, and it looks great.
Let’s scroll down so I can show you the new data that will appear below, since we now own a share of GPRO.
Here we can see our share(s), average cost, equity value, portfolio diversity, today’s return, and total return of our GPRO stock.
$0.21 return so far — not bad. But wait, that top news headline below our data looks a bit sketchy. There’s far more nuance behind a buy or sell decision than a news headline, of course. But let’s say our research leads us to believe it’s time to sell our share of GPRO.
Scroll back up and select ‘SELL’, and then we go through the exact same process as when we bought our share of GPRO.
Go through same motions as buying the stock.
Again, this part is optional, but for the sake of the tutorial let’s do a ‘LIMIT’ sell.
Set our price.
Hypothetically, we could set our limit above the current price per share, which is $8.26. It’s the same concept as when we bought the stock — if we are buying or selling stock in bulk, then a few cents can add up quickly.
I’m not worried about the few cents on one share of a stock, so I’m just going to enter $8.26.
Submit the order.
Once we select ‘Review’ we can swipe up to submit the order.
Patience my friend.
0 of 1 SHARES SOLD
It looks like the price must have dropped below our limit right before we swiped up to submit. In all likelihood, our order will be submitted shortly once the price bounces back up a penny — let’s take a look at the GPRO stock profile to check the status.
Order is placed.
The status of our order is ‘Placed’, so let’s keep patient.
In the meantime, remember the circle with the checkmark in the top right corner? It was there before we bought GPRO, as this signaled the share was on our watchlist.
Order sold for the price we chose.
That was quick, our share just sold while I brought that up. As you can see, the status of our ‘Limit Sell’ has changed from ‘Placed’ to the amount we placed it for, $8.26. Also, now we can see the circle with the checkmark at the top right, so GPRO is back on our watchlist.
Stock is back on our watchlist.
On our home screen we can see GPRO back on our watchlist below our stock portfolio.
It’s that simple.
As mentioned, anyone interested in trading stocks can enjoy the Robinhood app. And the best part about their platform is that all of this power at our fingertips is commission free.
Personally, I enjoy using Robinhood for my investment portfolio, but it’s not for everyone. If you think you’d like to give it a try, then feel free to use my link below to sign up — both of us will receive a share of random stock from Robinhood, for free.
Whether you’re a stock market virgin or a stock market guru, I hope you were able to find some value in this post.
GET A FREE STOCKIf you sign up for Robinhood with my affiliate link, then both of us will receive a share of stock for free.
Please feel free to chime in with any comments or questions you may have. I’m interested to see what you think!