The basic steps to trade on Robinhood

To place a trade on Robinhood, open the app or website, search for the stock or cryptocurrency you want to buy or sell, tap or click the ticker, then choose "Buy" or "Sell". You'll enter the number of shares (or dollar amount for fractional shares), select your order type, review the details, and confirm. The order goes to the market when ready if you use a market order during market hours, or waits until the market opens if you place it after hours.

Robinhood processes most stock trades during regular market hours: 9:30 a.m. to 4:00 p.m. Eastern Time, Monday through Friday. If you place an order outside those hours, it typically executes at the next market open. Cryptocurrency trades on Robinhood happen 24/7, so those orders fill whenever the price matches your request.

Once your trade executes, you'll see it in your portfolio and in your order history. The cash or shares move to your account when ready, though the settlement — the official transfer of ownership — takes two business days for stocks (called T+2 settlement) and is when ready for crypto.

Key Takeaways

  • Market orders execute at the current price right away during market hours, while limit orders wait until the price reaches the level you set.
  • Stock trades settle two business days after you place them, meaning you cannot withdraw the cash or sell the shares until settlement is complete.
  • Robinhood charges no commission on stock or cryptocurrency trades, but the bid-ask spread (the difference between buy and sell prices) is how the platform makes money.
  • You can trade fractional shares of stocks on Robinhood, meaning you can buy $50 worth of a $500 stock without owning a full share.
  • Options trades require you to enable options trading in your account settings and carry different rules around expiration dates and exercise.

Market orders versus limit orders

A market order buys or sells at whatever price the market is offering right now. If you want to buy Apple stock and place a market order, Robinhood fills it at the current asking price — you get the shares when ready but you don't control the exact price. Market orders are fastest and almost always fill completely, which makes them useful when you want in or out quickly.

A limit order lets you set a maximum price you'll pay (for a buy) or a minimum price you'll accept (for a sell). If you set a limit order to buy Apple at $150 and the stock is trading at $155, the order sits and waits. It fills only if the price drops to $150 or lower. Limit orders give you price control but may never fill if the stock never reaches your price.

On Robinhood, limit orders stay active during regular market hours and expire at the end of the trading day unless you change the order settings to "Good-Til-Canceled" (GTC). A GTC order persists until you cancel it or it fills, but it still only executes during market hours for stocks.

Understanding settlement and when you can use your money

When you sell a stock on Robinhood, the cash doesn't land in your account ready to withdraw when ready. Instead, it enters a settlement period that lasts two business days. During those two days, the trade is official but the cash is still "unsettled." You can use unsettled cash to buy other stocks, but you cannot withdraw it to your bank account or use it outside Robinhood.

This two-day rule (T+2) is a federal requirement, not a Robinhood choice. If you sell on a Monday, the cash settles on Wednesday. If you sell on a Friday, it settles on Tuesday (skipping the weekend). Robinhood does let you buy stocks with unsettled cash, but if you sell those new shares before the original cash settles, you may trigger a "good faith violation" on your account.

Cryptocurrency trades settle when ready on Robinhood, so you can withdraw crypto or use it to buy other crypto right away. This is one key difference between stocks and crypto on the platform.

How fractional shares work

Robinhood lets you buy fractional shares, meaning you can own 0.5 shares of a $1,000 stock or $25 worth of a $500 company. You don't have to buy in whole-share increments. When you search for a stock and tap "Buy," you can enter a dollar amount instead of a number of shares, and Robinhood calculates how many fractional shares that buys.

Fractional shares trade at the same price as whole shares — there's no premium or discount. When you sell, you sell the exact fraction you own. Dividends on fractional shares are paid proportionally: if you own 0.5 shares and the company pays a $2 dividend per share, you receive $1.

One limitation: you cannot place limit orders on fractional shares. You can only use market orders to buy or sell fractional shares. This means the price you pay or receive is whatever the market is offering at that moment.

Trading options on Robinhood

To trade options on Robinhood, you must first turn on options trading in your account settings. Robinhood requires you to answer questions about your investment experience and risk tolerance, then approves you for one of several options levels. Level 1 allows you to buy calls and puts only. Level 2 adds covered calls and cash-secured puts. Higher levels unlock spreads and other strategies.

Once approved, you search for an options contract the same way you search for a stock. You'll see the expiration date, strike price (the price at which you can buy or sell the underlying stock), and the current bid and ask prices for the contract. You choose "Buy to Open" to buy a contract or "Sell to Open" to sell one, then place your order like a stock trade.

Options contracts expire on specific dates — usually Fridays for standard options. If you own a call or put and do nothing, it expires worthless after market close on the expiration date if it's out of the money (not profitable). Robinhood will notify you before expiration, but it's your responsibility to close or exercise the contract if you want to keep it alive.

Bid-ask spreads and how Robinhood makes money

Robinhood advertises zero-commission trading, which is true — you pay no fee per trade. Instead, the platform makes money through the bid-ask spread. The bid is the highest price a buyer will pay right now; the ask is the lowest price a seller will accept. When you place a market order to buy, you pay the ask price. When you sell, you receive the bid price. The difference between those two prices is the spread, and that's Robinhood's revenue.

On highly traded stocks like Apple or Tesla, the spread is usually tiny — a penny or two per share. On less-traded stocks or small-cap companies, the spread can be wider, meaning you pay more to buy and receive less to sell. Limit orders let you avoid paying the full spread by setting your own price, but they may not fill if the market never reaches that price.

Robinhood also makes money through payment for order flow (PFOF). When you place a trade, Robinhood sends your order to a market maker (a firm that buys and sells stocks constantly) rather than directly to an exchange. The market maker pays Robinhood a small fee for that order, and the market maker profits from the spread. This is legal and common across the industry, but it means Robinhood has a financial incentive to route your order to certain market makers.

Placing after-hours trades

Robinhood lets you trade stocks during extended hours: 4:00 a.m. to 9:30 a.m. before the market opens, and 4:00 p.m. to 8:00 p.m. after it closes. To place an after-hours trade, search for the stock, tap "Buy" or "Sell," and before you confirm, look for the order type dropdown. Select "Extended Hours" instead of the default "Regular Hours."

After-hours trading carries higher risk than regular-hours trading. The bid-ask spreads are wider because fewer traders are active, so you may pay more to buy or receive less to sell. Volume is lower, meaning large orders may not fill completely. Price swings can be sharper on smaller volume. Robinhood only accepts market and limit orders during extended hours — no stop orders or other order types.

After-hours trades still settle on the standard two-day schedule. If you buy after hours on Monday evening, the shares settle on Wednesday, and you cannot withdraw the cash until then.

Frequently Asked Questions

Can I cancel a trade after I place it?

You can cancel a trade only if it hasn't filled yet. Once Robinhood shows "Filled" in your order history, the trade is complete and cannot be undone. If you placed a limit order that hasn't filled, you can cancel it from your order history. Market orders usually fill within seconds during market hours, so canceling is rarely possible.

What happens if I don't have enough cash to buy a stock?

Robinhood will reject the order if you don't have enough settled cash. You can use unsettled cash from recent sales to buy, but if you don't have enough of either, the order won't go through. The app shows your available buying power at the top of the screen — that's the cash you can actually use right now.

Do I pay taxes on trades I make on Robinhood?

Yes. Any profit you make on a stock or crypto trade is taxable income. Robinhood sends you a tax document (Form 1099) at the end of the year showing your gains and losses. Trades held less than one year are taxed as short-term capital gains (at your ordinary income tax rate). Trades held over one year are taxed as long-term capital gains (usually at a lower rate). Robinhood does not calculate your taxes — you report them when you file.

What's the difference between a stop order and a limit order?

A limit order sets a price and waits for the market to reach it. A stop order (or stop-loss order) triggers a market order once the price falls to a level you set. If you own Apple at $150 and set a stop at $140, the order sits dormant until Apple drops to $140, then automatically sells at whatever the market price is at that moment. Stop orders are useful for protecting against big losses but can lock in losses during temporary dips.