Robinhood is a stock trading app that is ideal for beginners looking for something that is easy to use and charge no commissions. The smartphone app allows anyone to buy and sell shares for free, in publicly traded companies on U.S. exchanges. Charging no fees is a revolutionary idea within the brokerage industry and has received significant media coverage due to their business model. There has to be a catch; it sounds too good to be true! Investors should be cautious because no fees means trade executions are slower than the leading brokers. The Silicon Valley start-up founded in April 2013, has 3 million customer accounts and is valued at $8.3 billion based on their latest round of funding. Robinhood currently only accept people from the United States but have plans to launch in the UK and Australia in a few years. It’s only a matter of time before they expand into new countries.

The company was setup up by Baiju Bhatt and Vladimir Tenev, former college students at Standford University. When they left college, they headed straight to Wall Street to set up their own business, specializing in creating trading platforms for some of the world’s biggest financial institutions. Here they noticed that electronic trading firms and high-frequency traders paid little or nothing to place thousands of trades every day, while retail traders were being charged $10-$20 per trade. They made it their mission to challenge the status quo.

Setting Up an Account

In comparison to other brokerages, it’s easy to setup an account and only takes 10 minutes to fill out your details, and then wait for approval.

To apply for an account, you are required to meet these four requirements:

• Possess a Social Security Number
• Provide proof of legal residential address within the US.
• Be a U.S. citizen over 18 years of age
• Have a mobile device to use the app (currently, they are working on the desktop to cater to everyone)

Once you fill out contact information and validate your SSN, you are allowed to attach your bank account, so you can deposit money to begin trading. On average it takes 1-3 days to get approved, in some cases, it can take up to 5 days if incorrect information is provided. If you’re still not verified after five business days, contact their customer service team to speed up the process.

Pro’s

No Commissions & no account minimum – Zero commission trades is the sole reason why Robinhood is quickly becoming the most popular broker for millennial trades. Brokerage firms such as Etrade and Interactive Brokers charge a fee every time you buy and sell stock; typically they charge $5 -$10 per trade. Over time this can add up and eat into your potential profits.

User Interface – The app’s design and the user interface is very slick. Their easy-to-use interface means it’s simple for novices to place trades. The interface’s theme changes color from light during market hours to dark during when the stock exchange is closed.

Great for Beginners – Ideal for first-time investors who have limited day trading experience and have a small amount of money to invest. Part-time traders can gain a feel for the market in a safe environment and then later upgrade to a broker that offers more advanced features such as level 2, charts and quick executions.

Robinhood Gold – The company recently introduced a premium service to allow members to trade after hours and open a margin account; the margin is limited to protect users from too much downside risk. The gold account costs a minimum of $10 per month; this allows you to borrow 2x times the amount of capital in your account, you need to deposit at least $2,000 to take advantage of this feature. They have a tiered pricing structure, the more buying power you request, the more you will have to deposit and pay. E.g. $4000 for $20/month and $10,000 for $50/month. Leverage is dangerous for novice traders as they can end up owing money to the broker.

Smart Notifications – Alert members to news such – earnings reports, dividends or stock splits, giving you timely information that will help you manage your portfolio.

Con’s

Slow executions – Fast trade executions are the difference between winning and losing trades. Trade executions are not as quick as the larger institutions, so you’re at a disadvantage because you don’t have the opportunity to get in and out of trades at the best possible prices. Hopefully, with Robinhood instant, the gap in speed to competitors will decrease and it now no longer takes 1-3 business days to get access to funds after selling.

Poor customer service – They have 2 million users, and the customer service team is struggling to serve all their customers, they need to invest more into customer support. Their office is tiny; it’s literally a handful of people in a small WeWork space in Santa Clara. Response to emails will be slow and you’ll need patience when calling the customer support team to solve any problems you may have.

Novice traders are blowing up accounts – Robinhood has greatly reduced the barriers to entry, making it faster and easier for anybody to trade stocks. This isn’t necessarily a good thing, 100’s of young, uneducated traders will blow up their accounts and soon realize trading isn’t as easy as it looks. Thousands of millennials lost money investing in the Snapchat IPO that turned out to be a disaster. Snapchat IPO’d at $25 and is now at an all-time low of $11.83.

Limited trading tools – Lack the necessary tools and resources to support day traders. They don’t provide extra features such as charts, stock scanners and level 2 as 90% of users are part-time traders who only place 3-5 trades per week.

No short selling – Robinhood doesn’t allow customers to short sell companies, so you’re unable to capitalize when the price of stocks decline. They hope to offer short selling as an order type in the near future.

Not suitable for penny stock traders – This app is better suited for buying blue chip stocks and ETF’s. There is a limited selection of penny stocks on Robinhood; most penny stocks trade on smaller exchanges such as the OTCBB and Pink Sheets. Millennials have a strange obsession with penny stocks on Robinhood, most of them randomly invest in a company under $1 hoping to strike it rich. Luck is not a strategy; you might as well flush your money down the toilet!

PDT rule – By offering free trades. they encourage people to trade more frequently, and they focus much on short-term price movements. Scalping is a waste of time due to high-frequency trading as you will get front-run by algorithms. The pattern day trader rule tends to stop most users from overtrading.

Frequently Asked Questions

How does Robinhood Make Money?

As the saying goes “there’s no such thing as a free lunch.” They make money by collecting interest on deposits within customers’ accounts and through premium services such as Robinhood Gold. So far the startup has raised $176 million, this has given the company a chance to create a  “wonderful brokerage experience” without having to worry too much about short term profits. They should become profitable within the next 1-2 years and will have a significant impact on financial apps soon.

How is Robinhood Similar to a Bank Account?

Bank accounts contain cash deposits, while a Robinhood customer account will contain securities (stocks) and cash. Funds can be transferred to your Robinhood account from your bank account and then can be used to buy and sell shares. All accounts are SIPC insured up to half a million dollars, and there is no account minimum.

Is the Robinhood App Safe?

As they store hundreds of millions, they are vigilant with security because any breaches will destroy their reputation and put them out of business. They are a registered broker-dealer and a member of SIPC and FINRA just like other penny stock brokers such as Etrade and TD Ameritrade etc.

They are more cost efficient than other brokers who have dozens of storefront locations, who use legacy technology and paper-based accounting. As a result of these two factors, they can drastically reduce their costs and will not have to charge customers commissions or any other unnecessary markups.

Robinhood Penny Stock List Under $1

Company	Ticker Symbol
BioAmber Inc.	BIOA
Ability Inc	ABIL
Vaalco Energy Inc	EGY
Vertex Energy, Inc	VTNR
Obsidian Energy	OBE
Fuel Tech, Inc.	FTEK
Pacific Drilling S.A.	PACD
U.S. Energy Corp.	USEG
Pengrowth Energy Corporation	PGH
ESSA Pharma Inc.	EPIX
Delcath Systems, Inc.	DCTH
MoSys, Inc.	MOSY
Vince Holding Corp.	VNCE
Netlist, Inc.	NLST
TheStreet, Inc.	TST
Walter Investment Management Corp.	WAC
Astrotech Corporation	ASTC
Turtle Beach Corporation	HEAR
Harte-Hanks, Inc.	HHS
Eltek Ltd.	ELTK

Robinhood Penny Stock List Under $5

Company	Ticker Symbol	Exchange
ARCA biopharma, Inc.	ABIO	NSDQ
Chesapeake Energy Corporation	CHK	NYSE
DryShips Inc.	DRYS	NSDQ
Yamana Gold Inc.	AUY	NYSE
Zynga Inc.	ZNGA	NSDQ
Noble Corporation	NE	NYSE
Avon Products, Inc.	AVP	NYSE
Groupon, Inc.	GRPN	NSDQ
Office Depot, Inc.	ODP	NSDQ
Vivint Solar, Inc.	VSLR	NYSE
J.C. Penney	JCP	NYSE
Glu Mobile Inc.	GLUU	NSDQ
Rite Aid Corporation	RAD	NYSE
Plug Power, Inc.	PLUG	NSDQ
ENSCO PLC	ESV	NYSE
Windstream Holdings, Inc.	WIN	NSDQ
Whiting Petroleum Corporation	WLL	NYSE
AVEO Pharmaceuticals, Inc.	AVEO	NSDQ
Novavax, Inc.	NVAX	NSDQ
Kinross Gold Corporation	KGC	NYSE

Robinhood Alternatives

For investors outside of the US, there are some are similar apps you can use to buy stocks for free! TradeZero.co is a cheap alternative; they are a brokerage firm operating in the Bahamas. TradeZero give free limit orders if the order does not create an immediate mate. Since they are based in the Bahamas, you can bypass the PDT rule. Another good option for people in the UK is freetrade.io, they are another commission free broker that launched in 2019. Etrade and Interactive Brokers’ are the best-paid alternatives for those serious about day trading.

In conclusion, it will be interesting to see how their business model will fair out and how the big brokers will react to their rapid expansion.

While penny stocks are risky to trade for beginners, they are a great way to capture massive returns with a small investment. Penny shares are cheap to buy and volatile, meaning fortunes can be made or lost overnight. For every trader who became a multi-millionaire, there are horror stories of people blowing up accounts and end up owing money! With that in mind, before you open an account with a brokerage, make sure you’re 100% ready.

Although there are dozens of stock brokers with no account minimums, not many of them are suitable for penny stocks. Luckily for you, I have compiled a list of the best penny stock brokers with no minimum deposits and charge cheap commissions.

TD Ameritrade 

• TD Ameritrade is one of the most reputable online brokers with no account minimums for clients!
• Ideal for penny stocks as they charge a $6.95 fee per trade with no surcharges on stocks under $1, making it more affordable to trade OTCBB and Pink Sheet stocks.
• Two great trading platforms available to all customers – Thinkorswim and Trade Architect.
• Robust charting tools that can be customized to meet your requirements.
• Don’t have annoying inactivity or maintenance fees.
• Free access to real-time quotes and level 2, perfect for active day traders
• Customer service is average, to lower costs they outsourced it to cheaper countries such as India.

E-Trade

• E-Trade is my number one pick as the best broker for trading penny stocks.
• Is a highly recommended broker for short selling shares under $5.
• Flat fee commission structure with no extra fees on penny stocks!
• Discounts given to active traders, $6.95 commission for less than 30 trades every quarter, make more than 30 trades and the fee drops to $4.95.
• Don’t accept customers from certain countries which sucks for people in the UK.

Ally Invest

• Formerly known as TradeKing, Ally Invest are another penny stock broker with no minimum deposit required.
• $2,000 account minimum for margin accounts, giving people the chance to profit from short selling companies.
• Suitable for beginners traders new to stock trading and don’t have much money to invest.
• Commissions are low, $4.95 per trade is very competitive within the brokerage industry.
• User interface is appealing to users, making it faster and easier to execute trades.
• Charge a one-cent surcharge per share on stocks below $2.
• Regularly run promotions for new customers. Currently, they offer $500 worth of commission-free trades for clients who deposit $10,000.
• Trading platform and tools aren’t as advanced as the top online brokers but is improving slowly.

Robinhood

• Robinhood has quickly become the most popular broker among millennials.
• The start-up broker offer commission-free trades to millions of people around the world.
• While getting free trades may seem like a great deal, there is a catch. Executions will be slower than the industry standard, penny stocks are volatile and speed is crucial to make consistently profitable trades. More suited towards long-term investors.
• Despite the downsides Robinhood are great for first-time investors looking to gain experience and have fun.
• UI design is beautiful and easy to navigate.

TradeMonster

• TradeMonster is a subsidiary of OptionMonster, owned by well-known financial commentators, Pete Najarian and Jon Najarian.
• Their parent company specializes in Options trading and setup TradeMonster to offer more diverse financial products to the market.
• In 2015, they merged with OptionsHouse and were later taken over by E-Trade.
• $0 account minimum required to open a cash account.
• $0.005 surcharge per share on stocks below $2.
• Not a good option for beginners.

Degiro

• Degiro is a low-cost Dutch broker, only available to European investors.
• Low account minimum, €0.01 has to be deposited during the verification process.
• Limited selection of penny shares on their platform but they have ridiculously cheap fees.
• Good choice for traders in Europe as they find it challenging to find penny share friendly brokers. The majority of US brokers won’t accept costumers from Europe or require a deposit of $10,000.
• Compensation scheme protects deposits up to €20,000.

Even though these companies have low minimum requirements, I advise picking the broker that suits your trading style.

It is truly incredible to consider just how far technology has come in terms of investing. Human beings used to use the “open outcry” method centuries ago, where bidders and sellers would be made in an open market. These days, there are individuals all over the world that can invest and trade simply by moving their finger on smartphones that fit in their pockets.

However, it can be tough to navigate which trade platforms are worth using. Does the platform have all of the features that you are interested in? Which features are most important to you? Tradezero is a platform that definitely has a lot to offer, and might be the right choice for many. Here is a review of some of Tradezero’s main features and any potential drawbacks.

Variety Of Platforms

Tradezero understands that there are different platforms that might make more sense for individual traders than others. For example, some individuals have a high-tech trading set up at a desk with many monitors, and others might be casually trading from their day job on their mobile phone. ZeroPro, the company’s most professional platform, offers Level 2 trading information, streaming quotes, and provides the most all-encompassing trading experience. ZeroPro does charge by the month.

ZeroFree is their free platform, which is limited in terms of features. However, ZeroFree does still provide two charts with indicators, and an upgrade allows you to change options on the platform. ZeroMobile is the free “add-on” mobile app to the platforms, as well.

Free Limit Orders

There are plenty of companies that are eager to find ways to appeal to as many consumers as possible, hoping to be successful. Tradezero markets the fact that it offers “free limit orders”, which is certainly quite a way to develop a customer base. However, it should be noted that the limit order has to be for 200 shares of a stock that costs more than $1, and trades on certain exchanges.

This might not come as a surprise to most, but it should be clarified. The trade would also have to be “unmatched”, meaning that your trade would be providing some liquidity to the stock, whether it’s on the buy or sell side. Interested in less than 200 shares? You’ll pay 99 cents as a flat fee.

Great For Margin Traders

Tradezero offers high day trading leverage, which is incredible for those who are interested in short-term trades rather than long-term swings. Of course, this is great for more experienced traders who may be more well-versed in risk management than others. Tradezero offers 6:1 once you have over 2500 in your account, which is quite appealing to those who are used to margin trading. For those who are unaware, this means that an individual with $10,000 in their account could potentially trade up to $60,000 in equities. One of the best aspects of TradeZero is that it allows you avoid the PDT rule, which is great for those who want to trade more frequently.

Ultimately Worth It

There are plenty of traders that are interested in trading the U.S. stock markets on a platform that doesn’t charge too much in terms of commissions and that has all of the information that they are interested in. Tradezero is particularly useful for experienced traders who are used to risk, whether they are margin traders or are interested in shorting particular stocks. Shorters, in particular, might flock to the app, considering that there are thousands of stocks that can be shorted on the platform. Tradezero is much more affordable than much of the competition, with a lot to offer.