Robinhood App Review – Robbing the rich or user trust?

With more than 20 million users with an average age of 31, Robinhood has taken its crown as the broker of choice for young and new investors alike. This is no surprise as it established itself as a disruptor in the broker market amongst bigger players like Plus500 app, being among the first to offer commission-free trading and pioneering what is now an industry standard.

We found Its sleek design, ease of use, and “gamification” of investing and trading has attracted both praise and criticism in 2021. But its success and platform allows millions to invest and trade, regardless of how much money, or experience, they have.

Robinhood App review – Great but fairly standard

When it comes to ease of use and simplicity for first time investors, Robinhood does a fantastic job with no upfront costs or barriers to entry. You’ll be able to invest in most well-known stocks and asset classes, as well as having the ability to trade options. While this is incredibly useful and diverse as a broker, its marketing strategy and the tools available offer an easy route to very risky trading where a lot of money can be both made and lost very quickly. Though this is up to each individual investor and the risk they are willing to take.

Placing a few trades, I quickly found that there was a day trading limit, so for accounts under $25,000 long term investing, swing investing, or VERY limited day trading is what it’s best suited for.

Pros

  • No Commissions
  • Sleek app
  • Beginner friendly
  • Great variety of instruments and investment styles
  • Great benefits for inviting friends
  • Automate your investing

Cons

  • Controversial past
  • Limited charting tools
  • Limited research & analysis
  • Not currently available in UK

Is Robinhood available in the UK?

While Robinhood was set to debut in the UK back in 2020, it was postponed indefinitely and has yet to be launched here, though it could at some time in the future. This review is based on the current US version but is likely to have similar features when it launches in the UK.

Is it free to use?

Robinhood is a $0 commission-free broker, and charges no commission on trading crypto, stocks, options or ETFs. It’s free to use and the only costs come in the form of a premium service. In the robinhood app review, we found it to be increibly good value.

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Robinhood Gold

Robinhood Gold is their “premium” membership costing $5 per month. Purchasing it gives you access to margin trading (at 5% annual interest), Morningstar report, and level II streaming quotes. In my opinion, it doesn’t offer anything of much value other than the ability to trade with margin, though why that is something that is behind a paywall isn’t clear.

Payment For Order Flow

PFOF has been a big controversy with Robinhood in recent years, and is one of the main reasons, along with the prevalence of options trading, why the app was postponed indefinitely for the UK market. PFOF is how Robinhood mainly makes its money, by selling order flow to Market Makers (large investment firms). By doing this they are essentially selling trader information to third parties, allowing them to controversially make decisions and profit from order and volume information before it hits the market. Although this is fairly common practice among most “no fee” brokers, Robinhood’s popularity and large public outages at key moments in the market of 2020-2021 brought it disproportionate negative attention.

Refer-a-friend rewards

Robinhood offers a very generous refer-a-friend reward scheme. For every person a user convinces to join the app and link their bank account, they will each receive a free stock. This can be repeated as many times as you want until the total value of the stocks received exceeds $500.

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App useability

The user-interface on the app was sleek and clear, and during our Robinhood app review it I experienced no slowdowns or had any issues of any kind. I was very impressed with the effort that was put into designing the app.

Day trading restrictions

Accounts need to be over $25k to avoid the Pattern Day Trader restriction, which triggers on accounts that make more than 3 round-trip trades in a 5-business day period. This can be seriously limiting if your intention is to day trade, but this is a regulatory standard across the industry in the US. Breaching this limit puts a 90-day restriction on day trading unless your portfolio value exceeds $25,000 (not including crypto).

Research and informative content

The investment research and analysis provided on the Robinhood app was fairly minimal in my opinion, and much less informative than most other brokers that I’ve used. While there was fairly helpful insutructional information on how to execute trades, and profit/loss calculations provided, there was almost nothing in terms of analytical content aside from news pieces and summary analytics.

While I wouldn’t class it as research analysis, there is a very entertaining informational daily newsletter called “Robinhood Snack,” pictured below, which I found to be a good highlight to each day and definitely worth subscribing to.

Charting tools – basic but effective

Unfortunately, in our Robinhood app review we found it to be seriously lacking on information that would come as standard for most brokers. Most notably is the lack of charting software and technical indicators. There are only 5 indicators available, which are:

  • Volume
  • Moving Average (MA)
  • Exponential Moving Average (EMA)
  • Relative Strength Index (RSI)
  • Moving Average Convergence Divergence (MACD)

This is a far cry from most other professional brokers which offer up to hundreds of different indicators and charting tools. The graphing is also relatively limited, with specific time intervals and little chart manipulation, limiting your ability to look at charts from specific timescales or ranges other than the set defaults.

Investment choices

We found a wide range of investment vehicles offered during our robinhood app review, although notably mutual funds, futures, forex and bonds are not included. However, for most investors, Robinhood offers a wide variety of highly popular assets to invest in. You can start with any amount of money, and invest in fractional shares, allowing you to buy expensive stocks, such as Amazon, without needing the full value of a share. Another really useful feature is the ability to schedule monthly investments, allowing you to put long-term investing on autopilot.

Equities Indices and ETFs

You can invest in over 5,000 stocks, including most US equities and ETFs on US exchanges. Additionally, there are over 650 global stocks offered through American Depositary Receipts (ADRs). Aside from ADRs, there are no foreign-listed stocks available to trade.

Options trading

Robinhood offers a fairly comprehensive suite when it comes to options trading, and you can buy or sell contracts in most US equities and ADRs. Over time, the options toolkit has become increasingly extensive and helpful to new traders. For example, when you go to make an options trade, it gives you some set strategies and gives the user information on the direction of each one. This goes a long way to helping new investors understand how they make and lose money on a particular option and gives them clear price targets and expiry information to make the trade simple to understand and easy to execute. I was very impressed with this aspect of the app.

Controversy

As Robinhood is popular among younger and newer investors, the broker gained a huge influx of users during the GME/AMC “meme stock” phenomenon in early 2021. However, during key trading days, the broker made a series of decisions that a large majority of its userbase thought to be against the interest of its users and for the benefit of large hedge funds who stood to lose a lot of money if certain stocks rose in value.

Notably, at the height of the GME “short squeeze” Robinhood disabled the option to buy GME stock, giving users only the option to sell their current holdings. Many users saw this as an attempt to manipulate the price and stop it from going higher. In addition to this, the app faced long outages where people were unable to trade during volatile market conditions for days at a time. These together led to a loss of trust in the broker, with 56% of users stating at the time they were considering leaving the platform over the fiasco. Robinhood claimed the outages and buying limitations were due to unprecedented demand and problems with meeting regulated liquidity standards.

Can you buy crypto on Robinhood?

Robinhood allows you to buy and sell a small selection of cryptocurrencies. I would not recommend the app for buying crypto as you can get much more choice and better spreads on other crypto-based platforms.  

Can you trade commodities on Robinhood?

You cannot trade commodities directly as spot or futures, but you can buy commodity backed ETFs such as SLV and GLD.

When is Robinhood available in the UK?

Robinhood was postponed indefinitely in 2020 for a UK release and there are currently no announced expected date the broker will be available to use in the UK.

Conclusion

At the end of the day, Robinhood does what it advertises very well. It’s an exceptionally user-friendly, free brokerage app which is widely available and helpful to new and young investors. Its tools are limited, but easy to use and intuitive, and offers a great variety of investment options for different styles of investor. However, if you are looking for a more professional investment approach, with better research, analysis and tool availability, it’s best to look elsewhere.

If you are just starting out though, the Robinhood app is an excellent place to get into investing and learn the basics. If you can get past the controversies, and all you want is a no-fee platform to just place trades on, then you will be very happy. At least, when it releases in the UK at some point.

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