Robinhood is a brokerage app that lets you buy and sell stocks, options, and cryptocurrencies from your phone

Robinhood is a mobile and web-based platform owned by Robinhood Markets, Inc. that connects you directly to financial markets. You can use it to purchase individual stocks (shares of companies), exchange-traded funds (ETFs), options contracts, and cryptocurrencies like Bitcoin and Ethereum. The app handles the mechanics of the trade — it sends your order to the market, holds your securities in an account registered in your name, and shows you real-time prices and your account balance.

The platform charges no commission on stock and ETF trades, which means you do not pay a per-trade fee when you buy or sell. This is different from traditional brokerages, which historically charged $5 to $10 per trade. Robinhood makes money through other means: interest on uninvested cash in your account, premium subscription fees for advanced features, and payment for order flow (selling information about your trades to market makers, a legal practice).

You need a brokerage account to use Robinhood. This is a real investment account held at a real financial institution — Robinhood Financial LLC is a registered broker-dealer with the SEC and FINRA. Your account is protected by SIPC (Securities Investor Protection Corporation) up to $500,000 per account type if the brokerage fails, though this does not protect you from investment losses.

Key Takeaways

  • Robinhood is a brokerage platform where you can buy and sell stocks, ETFs, options, and cryptocurrencies without paying per-trade commissions.
  • Your account is a real brokerage account registered in your name and protected by SIPC insurance, but SIPC does not cover losses from bad trades or market drops.
  • You must fund your account with cash before you can trade, and you can withdraw money to your linked bank account at any time.
  • Robinhood offers margin accounts (borrowed money to trade) and options trading, both of which carry higher risk and require separate approval.
  • The app shows live market data and lets you set price alerts, but it does not provide personalized investment information.

How to set up and fund a Robinhood account

To open an account, you read the Robinhood app or visit robinhood.com, then provide your name, date of birth, address, Social Security number, and employment information. Robinhood runs a background check and verifies your identity. This process usually takes a few minutes, though in some cases it can take longer if additional information is needed.

Once your account is open, you link a bank account to deposit money. You can transfer funds from your checking or savings account using ACH (Automated Clearing House), which typically takes one to three business days. Robinhood does not charge a deposit fee. You can withdraw money back to your bank account at any time, though the withdrawal itself takes one to three business days to appear in your bank.

Your cash sits in your Robinhood account until you use it to buy securities. If you hold cash without investing it, Robinhood pays a small amount of interest on that balance — the rate varies and is set by Robinhood. You can also use Robinhood's sweep feature, which automatically moves uninvested cash into a money market fund to earn interest.

What you can buy and sell on Robinhood

Robinhood offers U.S.-listed stocks (shares of public companies), ETFs (funds that hold many stocks or bonds), and options contracts (bets on whether a stock price will go up or down by a certain date). You can also trade cryptocurrencies including Bitcoin, Ethereum, Dogecoin, and others. The app does not offer bonds, mutual funds, or international stocks.

To buy a stock, you enter the ticker symbol (like AAPL for Apple), choose how many shares you want, and confirm the order. The order executes at the current market price if the market is open, or at the opening price the next trading day if you place it after hours. You own the shares when ready and can sell them at any time during market hours.

Options and margin trading require separate approval. Options let you control a larger position with less money upfront, but you can lose your entire investment quickly. Margin lets you borrow money from Robinhood to buy more securities, but you pay interest and can be forced to sell your holdings if the account value drops. Both are riskier than buying stocks outright and are not recommended for new investors.

Account types and features

Robinhood offers a standard individual brokerage account (taxable account) and an IRA (Individual Retirement Account). An IRA has tax advantages — contributions may be tax-deductible and investments grow tax-free until you withdraw them in retirement. Robinhood offers both Traditional IRAs and Roth IRAs, each with different tax rules and withdrawal restrictions.

The app includes real-time stock quotes, price charts, and the ability to set price alerts (notifications when a stock hits a certain price). You can view your account balance, buying power, and a history of all your trades. Robinhood also offers a premium subscription called Robinhood Gold, which provides margin buying power, advanced charting tools, and other features for a monthly fee.

Robinhood does not provide personalized investment information or recommendations. The app shows educational content about how stocks and markets work, but this is informational only. You are responsible for all investment decisions.

How Robinhood makes money and what it costs you

Robinhood charges no commission on stock and ETF trades. However, the company makes money in several ways. It earns interest on cash held in your account. It charges a monthly subscription fee for Robinhood Gold. And it practices payment for order flow — it sells information about your trades to market makers and other firms, who use that data to execute your orders. This is legal but means your order may not always get the absolute best price available.

When you buy or sell, you may also pay a small spread — the difference between the bid price (what buyers will pay) and the ask price (what sellers want). This spread goes to the market maker, not to Robinhood, but it is a real cost to you. The spread is usually small for popular stocks but can be larger for less-traded securities.

If you use margin (borrowed money), you pay interest on the borrowed amount. If you trade options, you may pay fees depending on your account type. Robinhood does not charge inactivity fees or account maintenance fees.

Risks and limitations of using Robinhood

Robinhood is a real brokerage, but it is designed for self-directed traders — people who make their own investment decisions. The app does not tell you what to buy or sell, and it does not manage your money. If you make a bad trade, you lose money. If the market drops, your investments drop with it. SIPC insurance protects your account if Robinhood fails, but it does not protect you from investment losses.

The app's simplicity can be a drawback. It does not offer research tools, analyst reports, or detailed company information. If you want to research a stock deeply before buying, you will need to use other sources. The platform also does not offer fractional shares of most stocks, so you must buy whole shares at the current price.

Robinhood has experienced outages during high-volume trading days, which can prevent you from placing or canceling trades when you need to. The company has also faced regulatory fines for misleading marketing and failing to disclose conflicts of interest. These are historical issues, but they are worth knowing about.

How Robinhood differs from other brokerages

Most traditional brokerages like Fidelity, Charles Schwab, and E*TRADE also offer commission-free trading now, so Robinhood is no longer unique on price. The main differences are in the user experience and available features. Robinhood's app is simpler and more mobile-focused, which appeals to new investors. Traditional brokerages offer more research tools, educational resources, and customer service options.

Robinhood does not offer mutual funds, bonds, or retirement planning services. If you want a broader range of investments or professional guidance, a traditional brokerage may be a better fit. However, if you want a straightforward app to buy and sell stocks and cryptocurrencies, Robinhood is a functional choice.

Some investors use Robinhood alongside other brokerages — for example, using Robinhood for straightforward stock trades and a traditional brokerage for retirement accounts or more complex strategies. There is no rule against holding accounts at multiple firms.

Frequently Asked Questions

Is my money safe on Robinhood?

Your cash and securities are protected by SIPC insurance up to $500,000 if Robinhood fails as a company. However, SIPC does not protect you from losing money on bad trades or market downturns. Your investments can go down in value, and you can lose part or all of your money. Robinhood is a regulated brokerage, but regulation does not may provide your trades will be profitable.

Can I day trade on Robinhood?

Yes, but there is a rule: if you make more than three day trades (buying and selling the same security on the same day) in five business days, you must have at least $25,000 in your account. This is a federal rule, not a Robinhood rule. If your account falls below $25,000, you cannot day trade until the balance rises again.

Does Robinhood report my trades to the IRS?

Yes. Robinhood sends a Form 1099 to the IRS and to you at the end of the year, reporting your capital gains and losses. You must report this on your tax return. If you owe taxes on gains, you are responsible for paying them. Robinhood does not withhold taxes automatically.

What happens if I want to move my account to another brokerage?

You can transfer your securities and cash to another brokerage through a process called ACAT (Automated Customer Account Transfer). The receiving brokerage handles most of the work. The transfer usually takes five to seven business days. You do not have to sell your securities to move them.

Can I use Robinhood if I am not a U.S. citizen?

You must be a U.S. resident with a valid Social Security number to open a Robinhood account. Non-citizens with an ITIN (Individual Taxpayer Identification Number) may be able to open an account, but you should contact Robinhood directly to confirm. Robinhood does not serve non-residents.