March 18, 2021

The Truth about Robinhood app

Is Robinhood Good for Day Trading?

It’s almost impossible to discuss stocks and brokerage without mentioning the Robinhood app. With over 13 million active users on the platform, the Robinhood app is arguably one of the most popular trading apps in existence today. With so much buzz about the app, people are always tempted to ask what the big deal about the app is.

The truth about the Robinhood app is that it is a free stock trading app that offers zero commission or 100% commission-free stocks and other financial instruments such as options, ETFs, and cryptocurrencies like Dogecoin. Unlike traditional brokerage, you can trade at no cost with the Robinhood app No commissions and no trading fees. And they also have a $0 account minimums. The commission-free nature of the Robinhood app is the primary reason why most people, especially fledglings or newbies go on about the truth about the Robinhood app.

In addition to been the pioneer of commission-free trading, Robinhood is also recognized as the easiest platform for newbies who are looking to partake in the financial markets without reaching deep into pockets for capital. You don’t need a fortune to start trading on the Robinhood app and you don’t have to lose sleep over paying ridiculous commissions.

In addition to its $0 minimums and zero commissions, Robinhood has been applauded as the simplest trading platform for beginners. However, pro traders can opt for the Robinhood Gold subscription where they have to pay $5 per month for advanced services and resources.

How to make money with the Robinhood app

As we mentioned earlier, there Robinhood doesn’t have a limit for account minimums. So, you can trade your choice of financial instruments with little capital. And this brings us to how to make money from the stock market using the Robinhood app.

There are a couple of ways one can make money trading with Robinhood through dividends and asset appreciation. Let’s take a second to touch on both of them.

1. Dividends

In straightforward terms, dividends refer to the distribution of profits by corporations to their shareholders. The idea is to invest in a company that has prospects for expansion and whose share value will mostly increase in the future.

When the share value increases and the company make a profit, the share the earnings with shareholders based on a percentage of the stock price known as the dividend yield. How does Robinhood come into play?

You can make money with your investments in Robinhood by buying shares of corporations that pay dividends. While you are at it, you should bear in mind that you can always reinvest your percentage of the earnings into buying additional stocks. That way, your dividends will yield compound interest.

2. Asset appreciation

While researching what stocks to invest in, the chances are that you have come across the Maxim, buy low, and sell high. Buying the dip is the cornerstone philosophy of virtually every investor. Unless one has a crystal ball, you would have to rely on facts and market analysis to identify stocks with low prices and have high possibilities of increasing in value.

Robinhood users can leverage the tools and resources available on the platform to scout for viable and profitable stocks and execute trades in a knee jerk. Robinhood offers fast market execution on all market orders, including stop orders, limit orders, and stop-limit orders.

Robinhood also offers analyst ratings from independent investment Research Company. That way, you will have expert advice and pointers to top stocks and their anticipated benchmark within a specific time frame. If you had opted in for the Robinhood Gold subscription, you would have unhindered access to additional insights and research to help you make an informed decision when buying stocks.

Rounding off on asset appreciation, if you had bought a stock on Robinhood for $28 per share and the price surge to $125, you would have made a capital gain of $97 on each share you own.

Take the opportunity to learn while trading on Robinhood

In addition to its fast execution and appealing offers, the Robinhood app also offers an avenue for traders to view what other traders are doing and their performance. That way, you can get heads up on popular stocks.

While you are evaluating traders and their performance, you must have it at the back of your mind that past performances don’t guarantee future results. As such, you should consider leveraging Robinhood resources to assess the performance of stocks you are eyeing. One common mistake that newcomers make is to acting on reflexes.

When traders trade on reflexes, they sell stocks within a short time of buying (impulse), and such moves are always propelled by emotion, and you know how emotion affects trading psychology. While you don’t have to hold stocks for a very long time, selling on impulse can cause you to lose money.

Is Robinhood good for day trading?

The million-dollar question remains, what is the truth about the Robinhood app, and is this app good for active day trading? Or is it more for people who prefer swing trading or long-term investment? As an active day trader, myself I require fast executions, easy to use systems without many steps to input orders. Robinhood has decent executions but, in my experience, not super-fast. And not nearly fast enough especially for low float small-cap or micro-cap stocks. To place orders you do have to go through 2 different screens. While that may not be a problem for swing traders, it poses challenges for an active day trader.

What about Trading Tools in Robinhood?

The next item I want to talk about regarding Robinhood for day trading is the lack of trading tools. For those of you who watch my YouTube channel Hustle with JesseW” and watch my live trades. You see my charts with tools like VWAP, 9EMA, support, and resistance lines. These are things that Robinhood simply does not offer on its mobile app. These indicators are a huge part of my trading, as well as a lack of volume bars. Which coupled with charts, is the number one indicator I would use in live trading? With the above personal experience in mind, I would say that Robinhood is not an ideal option for active day traders.

What it’s best for?

Long Term investing
Swing Trading
Setting up a watch list
Watching live price action on the go
Monitoring stock news
The earnings calendar for each stock

Closing Thoughts On Robinhood For Day Trading

The Truth about Robinhood app is that while it is fine for swing trading and long-term investment. It lacks all the tools an active day trader would require to day trade. But thanks to them, many brokers offer no commission fees today, and that is something we should all thank them for.