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Robinhood app — how it works and everything you need to know

Robinhood app — how it works and everything you need to know
(Image credit: Shutterstock)
Editor's note

Be careful with cryptocurrency. The crypto market is highly volatile and we do not recommend any particular cryptocurrency.

Robinhood is an online trading platform founded in 2013 that offers unlimited commission-free trading and features an easy-to-use mobile app. It’s become the trading platform of choice for the Millennial generation. 

Why are over 13 million people trading on this relatively new platform with a quirky name rather than using well-established full-service brokers like TD Ameritrade, Fidelity, or Charles Schwab? Because Robinhood, as the name implies, makes it extremely simple for anyone — not just the wealthy — to invest in the financial markets. All you need is a bank account and as little as $1 and you can be trading in minutes. 

Robinhood is not the only online broker to offer commission-free trades, but it is one of the first to require no minimum account balance, offer fractional shares — meaning you can invest as much money as you want in a company regardless of its share price — and allow you to trade options contracts and cryptocurrency. Options and crypto are the big differentiators for Robinhood. Another differentiator is Robinhood’s incredibly simple mobile app, which is easier to use than those of its competitors. Way easier.

In fact, the Robinhood app is so easy to use that critics have complained it gamifies the risky practice of trading. (Swipe up to submit your trade!) Not only that, but Robinhood allows novice investors to trade options, which are complicated and extremely risky because you can lose more money than you have invested. Robinhood has countered by putting an emphasis on learning and offering a host of resources providing financial education for its users.    

The bottom line: The Robinhood app is a compelling trading platform for beginning investors who want a clean, basic user experience or anyone without a big bankroll who might want the ability to invest in options or cryptocurrencies. It’s not ideal for seasoned investors who want a large portfolio and robust market research.

Here’s everything you need to know about Robinhood, including how to set up an account, fees, what you can trade.

How to set up an account on Robinhood

Setting up an account with Robinhood is a piece of cake — the whole process takes about five minutes. Here are the steps to take to open an account on Robinhood:

  1. Go to Robinhood.com or download and open the Robinhood app and click “Sign up”
  2. Click “Claim your free stock now” (Robinhood gives all new customers one free share of stock—you’ll see what company it is once you complete the signup process)
  3. Enter your name, email and a password
  4. Enter your phone number and address
  5. Enter your Social Security Number, birthdate and country of citizenship
  6. Answer the multiple-choice question “How much investment experience do you have?”
  7. Answer the multiple-choice question “Are you employed?”
  8. Enter your employment information
  9. Answer whether you are a senior executive or 10% shareholder at a publicly traded company
  10. Answer whether you or a family member work for another brokerage
  11. Click “Submit application” (If approved, you’ll get an email confirming your account within seconds)
  12. Link a bank account to your Robinhood account (or choose to link one later). You’ll be able to trade up to $1,000 instantly once linked and funded

Robinhood app — how it works and everything you need to know

(Image credit: Robinhood)

What can I invest in on Robinhood?

Robinhood offers the ability to invest in stocks, Exchange Traded Funds (ETFs), options, gold and cryptocurrencies. You cannot invest in mutual funds, bonds, futures, or stocks that trade on non-U.S. exchanges.

What are the fees on Robinhood?

Opening an account is free. There are no fees on unlimited trades of stocks, ETFs, options, and cryptocurrencies. If you want to buy and sell gold, it starts at $5 per month to trade. 

How do I make trades on Robinhood?

Making a trade on Robinhood is so quick and easy. Some call it gamification, others call it simply a great user experience. You can place market orders, limit orders and stop orders. Here are the simple steps.

  1. In the search field (tap the magnifying glass), enter the name of the company you want to invest in 
  2. Click the “Buy” button
  3. Enter the amount of money you want to invest
  4. Click “Review”
  5. Swipe up to submit

How do I trade crypto on Robinhood?

Robinhood offers commission-free cryptocurrency investing for users who live in 46 out of 50 states and Washington, D.C. (You’re out of luck in Hawaii, Nevada, New Hampshire, and West Virginia.) The seven cryptocurrencies currently available for trading include Bitcoin, Dogecoin, Ethereum and Litecoin.

To buy one of them, simply enter the company name or symbol in the search field (the magnifying glass) and click “Buy.” Then follow the steps above for how to make a trade. Robinhood could be a great way to get into crypto, as it allows cryptocurrency trades to be placed in very small quantities while most other cryptocurrency-friendly platforms require minimums in order to trade.

How do I trade options on Robinhood?

A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date. There are two types of options: puts, which is a bet that a stock will fall; and calls, which is a bet that a stock will rise. On Robinhood, there are no commissions to buy and sell options and no monthly fee. In order to start trading options, you’ll first have to enable that ability. To start trading options, follow these steps:

  1. Click on “Account” or the person icon
  2. Click on “Investing”
  3. Scroll down and click on “Get Options Trading”
  4. Click “Sign Up”
  5. Click “Continue”
  6. Answer the yes/no question “Do you provide investment advice as part of your job?”
  7. Answer the yes/no question “Are you registered with a financial regulator?”
  8. Answer the multiple-choice question “How many years have you traded options?”
  9. Answer the multiple-choice question “Do you know how to enter an options spread?”
  10. Click “Confirm” to confirm your investment profile
  11. Click “Review”
  12. Click “I Agree”
  13. Assuming your application is approved, click “Continue” 

(Image credit: Robinhood)

You may now start trading options, including the following types of trades:

  • Buying Calls and Puts
  • Selling Covered Calls
  • Selling Cash Covered Puts
  • Exercising Options

To place an options trade, follow these steps:

  • In the search bar (tap the magnifying glass), enter the name of the stock you’d like to trade options for
  • Tap “Trade” 
  • Tap “Trade Options”

How does Robinhood make money?

If using Robinhood doesn’t cost you a penny, how does the company make money? Robinhood has three main ways it makes money. The first is by collecting rebates from market makers, who are the entities that execute your trades on the exchanges. The second is stock loan income — Robinhood earns money from lending stocks purchased on margin (by users but with Robinhood’s money) to counterparties. The third is by borrowing uninvested cash in users’ accounts and depositing it in interest-bearing bank accounts.

What is Robinhood Gold and is it worth it?

A standard Robinhood account is free, but Robinhood offers an upgrade to a premium trading platform called Robinhood Gold. With Gold, you gain access to premium features such as professional research and Level II market data, and instant transfers up to your Portfolio Value starting at $5,000 (up to a max of $50,000), rather than just $1,000 with a standard account.

(Image credit: Robinhood)

Additionally, if Robinhood approves your account for margin trading, you will be able to trade on margin with Gold. This means you can borrow money from Robinhood to pay for higher-value investments, with the securities in your account acting as collateral for the loan. You can try Robinhood Gold for free for the first 30 days, after which it costs $5 per month. 

What is the Robinhood Debit Card, and should I get it?

Robinhood is not a bank, but it offers a Cash Management service that comes with a debit card, allowing you to use Robinhood for everyday transactions. When you sign up for Cash Management you get, at no cost, a Robinhood debit card, an ACH account number and routing number, and access to Apple Pay, Google Pay or Samsung Pay.

(Image credit: Robinhood)

The Robinhood debit card is offered by Sutton Bank, member FDIC, and currently has a 0.30% APY. It’s powered by Mastercard. Fun fact: You get to pick the design of your card--Green, Black, White, or American Flag. As far as cash accounts go, Robinhood’s has some nice features, including:

  • No minimum to open or maintain the account
  • No in-network ATM fees
  • No foreign transaction fees for using your debit card abroad
  • No lost card replacement fees

Is Robinhood safe?

Yes, Robinhood is safe ... Like its competitors, Robinhood is regulated by the Securities and Exchange Commission (SEC) and is a registered member of the Securities Investor Protection Corporation (SIPC) and the Financial Industry Regulatory Authority (FINRA) in the United States. 

Why is Robinhood controversial?

Robinhood has been in the news a lot lately, and the subject of many complaints and several lawsuits. In December 2020, the Securities and Exchange Commission (SEC) charged Robinhood with misleading customers by executing their trades at higher prices than its competitors. Robinhood agreed to pay $65 million to settle the charges. That same month, Massachusetts filed a complaint against Robinhood, accusing it of aggressively marketing to often inexperienced investors and encouraging frequent trading by making its  app gamelike.

In addition, Robinhood’s decision to temporarily halt trading of GameStop and several other heavily shorted stocks in January 2021 has led to several class-action lawsuits. A large portion of the Reddit users who drove up the price of GameStop are Millennials and Robinhood is their trading platform of choice.

How do I contact Robinhood customer service and everything you need to know?

Robinhood doesn’t have a support phone number. All communication with Robinhood Support is done over email. To send an email to Robinhood Support, click on Account > Help > Contact Us, and then answer a series of questions. 

How do I close my Robinhood account?

There are two ways to close your Robinhood account. First, you can sell all of your Robinhood assets and transfer the balance of your Robinhood account to your bank via ACH. Then follow these steps in the app to deactivate your account:

  1. Tap the Account (person) icon
  2. Tap Settings
  3. Tap Account Information
  4. Scroll and tap Deactivate Account
  5. Follow the steps to close all your positions and withdraw your outstanding balance
  6. Once your balance is $0.00 and your positions are closed, you will be able to confirm your deactivation request.

Second, you may transfer all of your assets in Robinhood to another brokerage. To do this, you’ll need to contact your other brokerage and have them initiate the transfer. Note that there is a $75 fee to transfer your assets out of Robinhood, whether as a partial or full transfer.

For further information, go to Help Center > My Account & Login > Transferring Stocks in and out of Robinhood > Transferring Stocks out of Your Robinhood Account.

Jonathan Lesser is a writer and editor covering cryptocurrency and personal finance. He has been published in Men’s Health, Men’s Journal, Vibe, Travel + Leisure Golf and other publications. View all articles by Jonathan here.

Jonathan Lesser

Jonathan Lesser is a writer and editor covering cryptocurrency and personal finance. He has worked at two Fortune 100 financial services companies and has been published in Men’s Health, Men’s Journal, Vibe, Travel + Leisure Golf and other publications.