Robin Hood.com

Anyone looked into Robinhood.com? They offer zero commission trading. Sounds almost too good to be true.

Anyone looked into Robinhood.com? They offer zero commission trading. Sounds almost too good to be true.

Hi Not Dutch,
I guess that would be fine if I was a high speed trader, but being as I’m not, commissions are just a tiny, tiny part of whether my investments are successful or not. Therefore, I’d rather leave my investments and money with someone I have confidence in lie Schwab, and not with someone I don’t know beans about. Just thinking out loud.
Saul

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The obvious question, other than Saul’s question of security, is, how do they make their money, if not on commissions? Hopefully, it is not by robbing the rich and giving to the poor. Their answer is:

Robinhood charges interest for margin trading and collects interest on cash balances.

Robinhood is well-funded by notable investors such as Index Ventures, Ribbit Capital, Google Ventures, Andreessen Horowitz, Social Leverage, and many others, which affords us the freedom to focus on building a wonderful brokerage experience rather than short-term profits.

Charging interest on cash balances seems peculiar to me … usually cash sits in a money fund and earns interest, albeit not much these days.

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agreed…thought it was a bit iffy…

Evertime I have seen zero commission trades they last for about a year and then fees gradually increase onece they hit some critical mass of customers.

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Or they get you on the spreads, which could cost you a lot more than a commission. The smaller the market cap, the wider the spread tends to be between the bid and ask. Lots of brokerages have stock in their inventory and if you look at your orders you will often see that they sold you stock out of their own inventory which is a no-cost transaction to them, but executed at what price? I’ve had some issues with brokerages in the past where I didn’t get a good execution.

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Robin Hood, rob the rich…

Some time ago I looked into day trading. They use several larger computer screens, not a tiny phone screen. I’m paying $3 a trade, not $10, the benefit of switching to Robin Hood is vanishingly small.

Denny Schlesinger

I’ve had some issues with brokerages in the past where I didn’t get a good execution.

…this is true of any brokerage…

…which makes it imperative to use limits…

…you will get screwed using market orders…

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…which makes it imperative to use limits…you will get screwed using market orders…

On the contrary, I almost always get better than the listed bid or asked price, not worse, when I enter a market order at Schwab. For example, if the bid is at $15.20 and the asked is $15.26, and there are three people on the bid with 100 shares each — if I put in to sell 500 shares at the market, Schwab’s computers will shop around and see who is willing to pay a little more to get 500 shares without going all the way up to $15.26, and I’ll get a price of $15.213 or $15.227 or something like that. If I put it in at the bid (of $15.20) as a limit order, they will just say “we’re selling 500 shares for $15.20” and they’ll fill the 300 that are showing there and I’ll become the new asked. If a stock has adequate volume, I’ll usually put it in as a market order, unless there’s just 100 shares on the bid or asked. (You probably need Level 2 quotes for this).

Saul

When placing a trade check the bid/ask spread. If tight you can use a market order and get good execution. For options, penny stocks and low volume stocks limit orders are necessary sometimes accompanied with conditions like All or Non (AON) to prevent poor partial execution.

Denny Schlesinger

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I signed up to try it several months ago and I’m still waiting to get an account. I checked yesterday and I’m up to 200,000 and change on the waiting list. I guess that’s not bad given I started at 500,000 and something.

I have had the opposite experience than losing free trades. At Wells Fargo I signed up for several accounts with 100 free trades a year and got grandfathered in when they changed their fee structure.

I’m willing to give Robin Hood a chance with a small account to see how it plays out. I like to think if they are successful it puts pressure on all the discount brokers to lower fees to become competitive.

D.

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