OK so you’ve signed up with Robinhood. You’ve started trading. Commission free feels great. You’re not getting dinged by fees and you’re making money. You wonder why anyone would trade with the larger brokerage firms. $4 per trade is for suckers.

But wait. Things begin to go wrong. The buy you put in executes for $.20 more than when you placed it. The price graphs are slow to update and you are missing buy and sell points. Prices are changing rapidly and while you try to click through the menus quickly, your missing trades left and right. One time, the app straight crashed while you were trying to get out of a losing trade. That one hurt.

All of these things(and more) are issues with Robinhood. I’ve heard tirades the internet over about the lost money caused by Robinhood. Let’s go into each in detail and how you can mitigate them.

Issues:

Buys execute above current price:

This one is a quirk of Robinhood. When you do a Market buy, the app is trying to make sure you get your share. Think of it as you sent an “I want this stock no matter the cost” message and Robinhood is granting your wish. By boosting the price artificially Robinhood is guaranteeing that it will find a seller. You can think of the stock market as a crowd of people who want you to buy a stock at a set price and a bunch of people who want to sell their stocks at a set price. Normally this is close to the current price but there will be a distribution on both sides. If trades are executing quickly the price can shift rapidly. That market buy you placed is just keeping you in the asking prices. This also goes for Market Sell. They will drop the price your asking to make sure you get rid of the stock.
Problems with Robinhood: Not all Sunshine and Roses Limit Buy/Sell

Mitigation:

Limit buys/sells. These are a type of trade that sets…limits on what your willing to pay/receive. Say Ford is trading at 11.00. A market buy will probably execute at 11.10-11.20. A limit order will only execute if the price is at or below your set point. ALWAYS USE LIMIT BUYS! This protects you from artificially inflated prices and allows you to be in more control of your trades.

Problems with Robinhood: Not all Sunshine and Roses...Missing Buy and Sell Points

Missing Buy and Sell Points:

To be fair, Robinhood isn’t on the level as the other brokerage firms like Fidelity, Morgan Stanley, TD Ameritrade. If you go look at ThinkorSwim, TD Ameritrade’s trading platform, you will think convinced that Robinhood is toy. Also you’re pretty sure that weird button you pressed launched a UFO. Joking aside, those large brokerage firms pay a ton of money and have dedicated a huge  R&D budget to get fast up to date info. When using their tools you are paying them for the same data/capability.

Mitigation:

The simple answer is there is no way for Robinhood to overcome this limitation. The app is designed in such a way that prohibits the more advanced features normally associated with a trading platform. The easy fix to this is…use two platforms simultaneously. As I and many others have done, you can sign up for ThinkOrSwim and Robinhood. Use ThinkOrSwim for your analysis and timing, while using Robinhood to trade. Its a little clunky and you’ll need to have some juggling skills but it works.

App is Clunky:

As we talked about above, this is intrinsic to the app. Once browser trading is opened up to you, it is possible to trade on your computer, but this only helps mildly. The larger trading platforms have tools built in like hot keys for trades, macros, etc. At the moment, Robinhood doesn’t have any of those.

Mitigation:

Again the simple answer is your out of luck. The worse news is there isn’t a mitigation for this issue. It’s something you will have to deal with until you decide you want to transition to software that is more oriented to serious traders.

App crashes:

So I think this was more of an issue when I first started. Robinhood would hang trying to execute a trade and you would be unable to get out of/into a position. They have been working on their stability issues and have come a long way.
 Problems with Robinhood: Not all Sunshine and Roses Crashes

Mitigation:

The easiest way to avoid the problem is not trade a stock that is being heavily traded on Robinhood. Also try to avoid stocks that are abnormally volatile. I know, I know, that answer sucks but the issue is that the load of traffic on the app is too much for it.
Conclusion:

Robinhood has its pros and cos. I would argue it is a much better swing trading platform than it is a day trading one. If your serious about maximizing your trades and having instantaneous buys and sells, I would suggest a more robust platform. This post was to warn you of the issues you may face when starting to trade. The solutions above are just the ones I came up with when I was banging my head against the wall. If you look around, other traders have many more good ways to over come the limitations. All-in-all I enjoy using Robinhood as a non-serious, non-white knuckle, savings stock account. I have done some basic swing trading with stocks like JDST and JNUG but mostly I just add monthly and Dollar-Cost-Average my stock acquisitions.

Id love to hear from you down below in the comments. What are your experiences with Robinhood How did you over come the issues? Thanks for reading and stay furious!

If you enjoyed the post, please consider signing up with Robinhood using my affiliate link. Both you and I will get a random Stock in compensation and that helps me keep the ‘links’ on! Thanks again.

Comments

  1. Robinhood is the brokerage I use most followed by Schwab. I always use limit orders. In all honesty, though, I make small buys infrequently. I don’t think there is any platform better, for a guy like me than Robinhood. Great post on ways to mitigate the downside of Robinhood. Thanks.

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