Whether you are an active day trader, a long-term investor, or you have never bought or sold stock in your life, you’ve probably heard about the trading platform called Robinhood.
Robinhood revolutionized stock trading because they were the first commission-free brokerage platform.
Until a few years ago, a cost money to execute a trade. The sounds foreign and crazy now, but commission-free trading was unheard of.
Everything changed when Robinhood jumped on the scene because all established brokerages changed their model to remain competitive in the day trading environment.
Robinhood has an interesting reputation because it can be a fantastic tool for affordable trading, while it is also synonymous with gambling in other circles.
Today I want to discuss five positive reasons to open our Robinhood brokerage account, as well as provide a big warning against practices that can have a catastrophic impact on your finances.
Access to Markets
Trading stocks used to be expensive and complicated; Robinhood opened up the market to everyone with a smartphone.
This is a huge Advantage because anybody with a few extra dollars can invest directly into the economy and grow with it financially.
Robinhood has an excellent newsletter that’s published daily called Robinhood Snacks. It has excellent information on all things related to General market news and news related to your watch list.
News stations will often highlight what the Dow Jones Industrial Average or the S&P 500 did on a given day, could not provide much more insight than that.
Robinhood Snacks provides a unique blend of in-depth Financial concepts with easily accessible terms and explanations that help you become and much better-educated trader.
If you don’t like reading newsletters, Robinhood snacks also come in podcast form.
The podcast episodes range between 15 and 20 minutes and highlight the biggest stories of the day.
Mergers and Acquisitions, insider trading, government spending, and a host of other topics are discussed in detail on the podcast with very digestible takeaways.
I think it’s one of the most important benefits of Robinhood because not only are you able to trade stocks affordably, you can also learn about business, finance, accounting, and more through their platform.
You can also trade some cryptocurrencies on Robinhood, including Bitcoin, Litecoin, and Etherium.
I like that they offered crypto trading because they have most of the same tools for cryptocurrencies that they do for publicly traded companies like news updates, analyst recommendations, and more.
Stock Market Tools
Stock charts display things like market capitalization, trading volume, price-earnings ratios, highs and lows, and many more details that might not make sense if you don’t know what you’re looking at.
Whenever you open a stock chart or profile on the app, not only does it give you its price movement, it gives you easy to read metrics such as how many shares you own, but your return is, analyst ratings, and helpful graphs that show how the stock performs.
A cool social aspect of the platform is that there is also a section on each stock profile that shows what other people bought who also bought that stock.
This can be a great way to learn about new companies and expand your horizons for potential new Investments.
Learning the Lingo
Every industry has its jargon and terminology related to daily operations.
stock trading is no different, and the Robinhood Community does an excellent job of translating terms like a moving average into actionable pieces like “hey, this stock has been traded a lot more recently than it ever has before, something is probably going to happen at its next earnings release.”
things like daily highs and daily lows refer to what the top and bottom prices were for the sock that day, and the more you work with the platform, the more you will become familiar with the terms, which will result in you having a better understanding of the economy as a whole
I may have saved the best for last, but you can make money in the stock market through Robinhood.
Shocker, I know, but it’s important to remember that there are many other benefits for using their brokerage services on top of the ability to make some serious cash.
Like any other investment, you are not guaranteed any returns because anything can happen.
But if you invest wisely, do your research, and become familiar with the four steps I’ve outlined above, you’ll be much more prepared to handle your Investments, interpret financial news, and make informed decisions regarding where you decide to put your money.
BE CAREFUL WITH MARGIN
This is the big warning I was talking about.
Sophisticated investors use Leverage ( translated debt or credit) to accelerate their positions and stand to gain much more returns because of it.
For example, if you were trading $10,000 in one stock and feel like it’s going to go to the Moon, you can use margin to borrow 10000, 20000, or $30,000 to continue your speculation on that stock.
If you are correct about the stock’s direction, then you pay back what you borrowed, and you keep the profits.
There is great danger in this because if it goes sideways or against you, you can be in some serious debt and catastrophic financial trouble. The Great Bear of Wall Street had this to say about speculation:
“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.” — Jesse Livermore
While I believe trading is very important and Robinhood is a fantastic tool for new Traders, be wary of trading on margin if you do not have the money to lose or don’t know what you’re doing.
if you trade smart and use the tools that Robinhood has for you, I think it’s a great platform and brokerage service for anybody.
Plus, you get a free share of stock when you join! (Don’t expect a share of Amazon, though).