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

Robinhood is a mobile and web-based investment platform owned by Robinhood Markets, Inc. It lets you open an account, deposit money, and trade securities without paying commission fees on stock and options trades. The app is free to download and use, though you do need money in your account to actually buy anything.

The platform is designed for individual investors rather than professional traders. You can hold investments long-term, trade frequently, or do both. Robinhood makes money from interest on cash balances, premium subscription tiers, and payment for order flow — a practice where market makers pay Robinhood for the right to execute your trades.

Key Takeaways

  • Robinhood is a brokerage app where you can buy stocks, options, exchange-traded funds (ETFs), and cryptocurrencies without paying per-trade commissions.
  • You need to open an account, pass identity verification, and deposit money before you can trade anything.
  • The app is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), the same bodies that oversee traditional brokerages.
  • Robinhood offers fractional shares, meaning you can buy a portion of an expensive stock rather than waiting to afford a full share.
  • The platform has faced regulatory fines and restrictions for operational failures, so understand the risks before you trade.

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, email, date of birth, and Social Security number. Robinhood will verify your identity using public records and may ask you to upload a photo of your ID. This process usually takes a few minutes to a few hours.

Once verified, you can link a bank account and deposit money. Robinhood transfers funds from your bank using ACH (Automated Clearing House), which typically takes three to five business days. After the money settles, you can place your first trade. You can buy whole shares or fractional shares of any security Robinhood offers.

What you can and cannot buy on Robinhood

Robinhood offers stocks listed on major U.S. exchanges, ETFs, options contracts, and cryptocurrencies including Bitcoin and Ethereum. You can also trade certain international stocks through American Depositary Receipts (ADRs). The platform does not offer bonds, mutual funds, or forex trading.

Some securities are restricted or unavailable. Robinhood may halt trading in a stock during extreme volatility or if the company is delisted. In January 2021, Robinhood restricted buying (but not selling) of certain stocks including GameStop and AMC during a surge in retail trading — a decision that drew regulatory scrutiny and lawsuits. Restrictions like this are rare but have happened.

Fees and costs you should know about

Robinhood charges no commission on stock trades, options trades, or ETF trades. There is no monthly account fee. However, you will pay other costs depending on what you trade.

Options trades carry a $0.65 per-contract fee. Cryptocurrency trades include a spread (a markup on the price you see), which varies by coin and market conditions. If you use Robinhood Gold, a paid subscription tier, you pay $5 per month for margin trading and other features. Wire transfers out of your account cost $5. If your account falls below $25,000 and you day trade (buy and sell the same security on the same day), you will be flagged as a pattern day trader and may face restrictions.

How Robinhood makes money and what that means for you

Robinhood does not charge you per trade, but it does make money from your account in three main ways. First, it earns interest on cash you hold in your account. Second, it collects payment for order flow — market makers pay Robinhood to execute your trades, and Robinhood keeps that payment. Third, Robinhood Gold subscribers pay a monthly fee.

Payment for order flow is legal but controversial. Critics argue it creates a conflict of interest: Robinhood has an incentive to route your order to the market maker that pays the most, not necessarily the one that gives you the best price. The SEC has investigated this practice across the industry. Robinhood discloses where it routes orders, and independent research suggests the price difference is usually small, but it is worth understanding that you are not paying Robinhood directly — you are paying through the execution price.

Regulatory oversight and what happened in 2021

Robinhood is regulated by the SEC and FINRA, the same agencies that oversee E*TRADE, Fidelity, and other brokerages. In 2021, the SEC fined Robinhood $70 million for misleading marketing and failing to disclose how it made money from payment for order flow. FINRA fined Robinhood $12.7 million for supervisory failures and order routing issues.

In January 2021, Robinhood restricted buying of GameStop, AMC, and other stocks during a retail trading surge. The company said it was a risk management decision made by its clearing firm, but the move sparked outrage and multiple lawsuits. Robinhood settled some of these cases without admitting wrongdoing. The incident raised questions about whether a retail brokerage can restrict trading during volatile periods, and regulators have since scrutinized the practice.

These events do not mean Robinhood is unsafe — your cash and securities are protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account — but they show the platform has faced operational and compliance problems. Read Robinhood's disclosures and understand the risks before you trade.

Robinhood Gold and premium features

Robinhood Gold is a paid subscription that costs $5 per month. It includes margin trading (borrowing money to buy securities), access to pre-market and after-hours trading, higher deposit limits, and research tools. Margin trading lets you buy more than you have cash for, but you pay interest on the borrowed amount and can lose more than your initial investment if the trade goes against you.

Most beginners do not need Gold. The free version of Robinhood is sufficient for buying and holding stocks and ETFs during regular market hours. Gold is useful only if you want to trade outside normal hours or use margin, both of which carry additional risk.

Frequently Asked Questions

Is my money safe on Robinhood?

Your cash and securities are protected by SIPC up to $500,000 per account if Robinhood fails. However, SIPC does not protect you from poor investment decisions or market losses. If you lose money because a stock price falls, that is your loss, not Robinhood's responsibility.

Can I withdraw my money anytime?

Yes. You can request a withdrawal to your linked bank account anytime during market hours or after hours. The transfer usually takes three to five business days. If you have unsettled trades (trades that have not yet completed), you may not be able to withdraw that money until settlement is complete, which is typically two business days after the trade.

Does Robinhood report my trades to the IRS?

Yes. Robinhood sends Form 1099 reports to the IRS and to you at the end of the year if you have taxable events. You are responsible for reporting all gains and losses on your tax return, even if Robinhood does not send a 1099. Keeping records of your trades is your responsibility.

What is fractional share investing?

Fractional shares let you buy a portion of a stock instead of a whole share. For example, if a stock costs $1,000 per share, you can buy 0.1 shares for $100. This makes expensive stocks more accessible to people with smaller amounts of money to invest.

Can I trade options on Robinhood?

Yes, but you need to request options trading permission in your account settings. Robinhood will ask you about your investment experience and goals. Options are complex and risky — you can lose your entire investment quickly. Most beginners should not trade options until they understand how they work.