Robinhood is a brokerage platform where you buy and sell stocks, options, and cryptocurrencies through an app or website
Robinhood is a financial company that lets you trade stocks, exchange-traded funds (ETFs), options contracts, and cryptocurrencies without paying a commission fee per trade. You open an account, deposit money, and then place buy or sell orders for securities directly from your phone or computer. The company makes money from other sources — like lending out shares you own or earning interest on your cash balance — rather than charging you per transaction.
The platform is designed to be straightforward: you see a list of securities, their current prices, and charts showing how they have moved over time. You decide what to buy or sell, enter the number of shares or the dollar amount, and confirm the order. Robinhood then executes that order on your behalf through the financial markets.
Key Takeaways
- Robinhood is a brokerage where you can buy and sell stocks, ETFs, options, and cryptocurrencies without paying a commission per trade.
- You need to open an account, pass identity verification, and deposit money before you can place your first trade.
- Robinhood offers both a free basic account and a paid subscription called Robinhood Gold that includes margin trading and other features.
- Your cash and securities held at Robinhood are protected by the Securities Investor Protection Corporation (SIPC) up to certain limits.
- Robinhood executes trades during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays) and also offers extended-hours trading before and after those times.
How to open and fund a Robinhood account
To start trading on Robinhood, read the app or visit the website and select the option to create a new account. You will enter your name, email address, date of birth, and Social Security number. Robinhood will verify your identity using this information and may ask you to confirm your address.
Once your account is open, you need to deposit money. Robinhood accepts bank transfers from a checking or savings account you own. You link your bank account by providing your routing number and account number, or by using your bank's login credentials. Transfers typically take one to three business days to appear in your Robinhood account, though some banks process them faster.
You can also transfer securities you already own at another brokerage into Robinhood. This process, called an ACAT transfer, takes about five to seven business days and moves your stocks or ETFs without selling them first.
The difference between Robinhood's free account and Robinhood Gold
Robinhood's standard account is free to open and use. You can buy and sell stocks, ETFs, and cryptocurrencies during regular market hours. You can also trade options if you request options trading permission and meet Robinhood's requirements (usually a minimum account balance and some trading experience).
Robinhood Gold is a paid subscription that costs $5 per month. It adds features like margin trading (borrowing money from Robinhood to buy securities), access to extended-hours trading (before 9:30 a.m. and after 4 p.m.), and premium research tools. Most people starting out use the free account and upgrade later if they want margin or extended-hours trading.
What types of securities you can trade on Robinhood
Stocks are shares of ownership in a company. You buy a stock when you think the company will grow in value, and you sell it when you want to cash out your profit or cut your loss.
ETFs are funds that hold a basket of stocks or bonds. Instead of buying 50 different stocks, you can buy one ETF that owns all 50. This spreads your risk across many companies at once.
Options are contracts that give you the right to buy or sell a stock at a set price by a certain date. Options are more complex than stocks and can result in larger losses, so Robinhood requires you to request permission and demonstrate understanding before trading them.
Cryptocurrencies like Bitcoin and Ethereum are digital currencies. Robinhood lets you buy and hold them, though you cannot transfer crypto out of Robinhood to a wallet you control elsewhere.
How Robinhood executes your trades
When you place an order on Robinhood, the company routes it to market makers and exchanges that actually execute the trade. This happens almost when ready during market hours. You see the execution price and the time the trade went through in your order history.
Robinhood offers two main order types: market orders and limit orders. A market order buys or sells when ready at the current market price — you get filled right away but do not know the exact price until after. A limit order lets you set the price you are willing to pay or accept; the trade only goes through if the market reaches that price, which might not happen at all.
Regular market hours are 9:30 a.m. to 4 p.m. Eastern time on weekdays when the stock exchanges are open. If you have Robinhood Gold, you can also trade during extended hours: 4 a.m. to 9:30 a.m. and 4 p.m. to 8 p.m. Eastern time. Extended-hours trading is less liquid, meaning fewer buyers and sellers, so prices can be more unpredictable.
How your money and securities are protected
Robinhood is a registered broker-dealer regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). This means the company must follow rules about how it handles your money and what it can do with your securities.
Your cash and securities are protected by the Securities Investor Protection Corporation (SIPC), a government-backed organization. SIPC covers up to $500,000 per account if Robinhood fails — $250,000 of that for cash. This protection applies if the brokerage goes out of business, not if you lose money on a bad trade.
Robinhood also keeps customer cash in banks and money market funds, not in its own accounts. This separation means your money is not at risk if Robinhood has financial trouble.
Fees and costs you should know about
Robinhood does not charge a commission per trade, which is its main selling point. However, there are other costs to be aware of.
If you use margin (borrowing money to trade), you pay interest on the borrowed amount. The interest rate varies based on how much you borrow and market conditions. If you have Robinhood Gold, you also pay the $5 monthly subscription fee.
When you buy or sell a security, there is a small difference between the bid price (what buyers offer) and the ask price (what sellers want). Robinhood makes money from this spread, and you pay it indirectly by getting a slightly worse price than the absolute best available. This is standard across all brokerages.
Robinhood also charges a $75 fee if you request a transfer of your account to another brokerage and then close your Robinhood account within 60 days.
Frequently Asked Questions
Is Robinhood safe to use with my money?
Robinhood is a regulated brokerage, and your securities are protected by SIPC up to $500,000 per account. Your cash is held in banks and money market funds, not by Robinhood itself. The main risk is losing money on trades you make, not losing your money to the company failing.
Can I withdraw my money from Robinhood anytime?
Yes. You can request a withdrawal to your linked bank account at any time. The money takes one to three business days to arrive. If you have unsettled trades (trades that have not yet completed), you may not be able to withdraw until they settle, which is typically two business days after the trade date.
What happens if I buy a stock and the price drops?
You own the stock and can hold it as long as you want, hoping the price recovers. You can also sell it at any time during market hours to lock in your loss. Robinhood does not force you to sell, and you do not owe money just because the price fell — you only lose money if you sell at a lower price than you paid.
Do I have to pay taxes on my trades?
Yes. When you sell a security for a profit, you owe capital gains tax. Robinhood sends you a tax form (1099-B) at the end of the year showing all your trades. You report this on your tax return. Short-term gains (stocks held less than a year) are taxed as ordinary income; long-term gains (held a year or more) usually have lower tax rates.
Can I trade on Robinhood if I am outside the United States?
Robinhood is only available to U.S. residents with a valid Social Security number and a U.S. bank account. Non-residents and non-citizens cannot open an account.