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 brokerage platform owned by Robinhood Markets, Inc. It lets you open an investment account and trade stocks, exchange-traded funds (ETFs), options contracts, and cryptocurrencies without paying a commission per trade. You fund the account with your own money, place orders through the app or website, and Robinhood executes them on your behalf through its clearing partners.

The app is free to download and use. Robinhood makes money through payment for order flow (selling information about your trades to market makers), margin lending (charging interest if you borrow money to invest), and premium subscription tiers. You do not have to pay Robinhood directly to trade, but you do risk losing the money you invest.

Key Takeaways

  • Robinhood is a brokerage app where you deposit your own money and buy or sell stocks, ETFs, options, and cryptocurrencies without commission fees.
  • Your account is insured up to $500,000 through SIPC (Securities Investor Protection Corporation) if Robinhood fails, but SIPC does not protect you against investment losses.
  • You can start trading with as little as $1, but you must be at least 18 years old and a U.S. resident with a valid Social Security number or tax ID.
  • Robinhood holds your securities in street name, meaning the company owns them on your behalf; you retain beneficial ownership and voting rights.
  • The app offers real-time stock quotes, research tools, and fractional shares (buying a portion of an expensive stock), but does not provide personalized investment advice.

How to set up an account and start trading

To open a Robinhood account, download the app or visit robinhood.com, then provide your name, date of birth, email, and phone number. Robinhood will ask for your Social Security number or tax ID, your employment status, and your annual income. This information is required by federal law (Know Your Customer rules) and helps Robinhood determine which account type suits you.

After you verify your identity through a photo ID or other documents, you link a bank account to fund your Robinhood account. You can transfer money via ACH (Automated Clearing House), which typically takes three to five business days. Once the money arrives, you can place your first trade immediately. Robinhood does not require a minimum deposit, though some features (like options trading) may require you to hold a certain account balance or meet other conditions.

What you can and cannot trade on Robinhood

Robinhood lets you trade U.S.-listed stocks, ETFs, American Depositary Receipts (ADRs), and options contracts during market hours and extended hours (pre-market and after-hours). You can also buy and sell cryptocurrencies like Bitcoin and Ethereum 24/7. The platform does not offer bonds, mutual funds, forex (foreign currency), or futures contracts.

If you want to trade options, you must request options access through the app and meet Robinhood's requirements, which typically include a minimum account balance and a demonstrated understanding of options risk. Options trading is more complex and riskier than stock trading because you can lose more than you invest.

How Robinhood protects your money

Robinhood is a registered broker-dealer with the Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA). Your cash and securities are protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account ($250,000 for cash). This protection covers you if Robinhood becomes insolvent and cannot return your assets — it does not cover losses from bad investment decisions or market downturns.

Robinhood also holds your securities in street name, meaning the company owns them on your behalf but you retain beneficial ownership. You can transfer your securities to another brokerage at any time, though the receiving firm may charge a transfer fee. Robinhood does not charge you to transfer out.

Fees and costs you should know about

Robinhood charges no commission on stock, ETF, or cryptocurrency trades. However, you may encounter other costs: a $75 fee if you request a physical stock certificate, a $75 fee to transfer your account to another brokerage (though you can transfer out for free), and potential margin interest if you borrow money to invest. Robinhood also offers Robinhood Gold, a paid subscription tier that charges $5 to $10 per month and gives you access to margin and extended-hours trading.

When you buy or sell, the price you see may not be the exact price you pay because of the bid-ask spread — the difference between what buyers will pay and what sellers will accept. This spread is not a Robinhood fee; it is how financial markets work. Robinhood also does not charge you to hold cash in your account.

How Robinhood makes money from your trades

Because Robinhood does not charge you per trade, it makes money through payment for order flow. When you place a trade, Robinhood sends your order to a market maker (a firm that buys and sells securities) and receives a small payment in return. This arrangement is legal and common in the brokerage industry, but it means Robinhood has a financial incentive to encourage you to trade frequently.

Robinhood also earns money from margin interest (if you borrow to invest), premium subscriptions, and cash management features. None of these costs are hidden, but they are worth understanding before you decide whether Robinhood fits your investing goals.

Robinhood's history and the 2021 trading restrictions

Robinhood was founded in 2013 and grew rapidly by offering commission-free trading to younger investors. In January 2021, during the GameStop stock surge, Robinhood restricted trading on certain stocks, citing regulatory capital requirements. This decision sparked criticism and lawsuits, though Robinhood settled without admitting wrongdoing. The company has since faced ongoing scrutiny from regulators and lawmakers over its business practices and order routing.

In 2023, Robinhood agreed to pay $70 million to settle SEC charges related to misleading customers about how it made money and failing to disclose conflicts of interest. The company also paid $12.6 million to FINRA for supervisory failures. These settlements do not mean Robinhood is unsafe, but they show the company has faced regulatory enforcement actions.

Frequently Asked Questions

Is Robinhood safe? Will I lose my money if the company fails?

Robinhood is a regulated broker-dealer insured by SIPC up to $500,000 per account. If Robinhood becomes insolvent, SIPC protects your cash and securities. However, SIPC does not protect you against investment losses — if you buy a stock and it drops in value, that loss is yours, not Robinhood's fault.

Can I use Robinhood if I am not in the United States?

Robinhood is only open to U.S. residents and citizens. You must have a valid Social Security number or tax ID and be at least 18 years old. If you live outside the U.S., you cannot open an account.

What happens to my stocks if I delete the app?

Deleting the app does not affect your account or your holdings. Your securities remain in your Robinhood account and are held by the company's clearing partners. You can log back in anytime to check your balance or trade.

Does Robinhood offer financial advice?

No. Robinhood is not a financial advisor and does not provide personalized investment recommendations. The app offers educational content, research tools, and stock information, but these are informational only. Any investment decision is yours to make.

Can I buy fractional shares on Robinhood?

Yes. Robinhood lets you buy fractional shares of stocks and ETFs, meaning you can invest in expensive stocks like Amazon or Berkshire Hathaway with as little as $1. You cannot buy fractional shares of cryptocurrencies.