Robinhood Gold And Level 2 Quotes
Level 2 quotes are one of Robinhood Golds biggest value propositions. If youre unfamiliar with level 2 quotes, they show a depth of bids and offers for stocks. A level 1 quote tells you the last price traded, and the current best bid and ask.
Level 2 quotes display not only the current bid and ask, but the open orders at all prices.
In a desktop trading platform like ThinkOrSwim, a level 2 screen looks like this:
Heres a breakdown of what youre seeing:
- The Ex column stands for exchange. There are several different exchanges where traders route their orders, as you can see by the dozen or so different exchanges involved in bidding/offering Apple stock.
- The bid column is the bid price. Its a price that a buyer is bidding for the stock.
- The Ask column is the ask price. Its the price that a buyer is offering the stock at.
- The BS column stands for bid size. The numbers are in the hundreds. 4 means 400 shares are bid or offered.
Heres how level 2 quotes in Robinhood look:
Source: Robinhood Blog
The only piece of information omitted by Robinhood is the exchange quoting the stock, which is pretty irrelevant to Robinhood traders because they dont have direct market access anyways.
With direct market access, you might see that ARCA is offering a stock at $10.50, so you directly route your order to the ARCA exchange to trade with that order.
Is Robinhood Safe For Investors
Robinhood, the mobile-only online brokerage that disrupted the financial technology industry by charging commission-free trades, was launched in December 2014 with a waitlist of more than 500,000. Company founders Vladimir Tenev and Baiju Bhatt, Stanford physics graduates, believed that Robinhood would motivate a new generation of would-be investors with their mobile platform. Robinhood’s mission was to make the financial markets more accessible, primarily by offering zero-fee trades, no account minimums, and an easy-to-use mobile appeven if some were skeptical.
Robinhood launched a premium trading platform, Robinhood Gold, in 2016 that offers investors premium features for a $5 monthly fee. Robinhood Gold gives investors the ability to trade on margin up to $1,000, bigger instant deposits, and access to professional research and Level II market data. Investors who are interested in premium features can sign up for a 30-day free trial. There’s no doubt that Robinhood has won a loyal following, and the company is backed by major players such as Google Ventures, Index Ventures, and Andreessen Horowitz. But is it safe? Here’s what you should know.
Limited Free Research Components
You cant have it all when youre not paying anything for trades, and it really shows in the limited free research components being offered at Robinhood. This is not a killer for the right kind of investor savvy and experienced but may be a turnoff to newer investors who often need more direction from their broker. That said, Robinhood does funnel in lots of free educational content on investing and finance topics as well as its Snacks newsletter all of which can be helpful to newer investors starting their journey.
Of course, as part of its Gold program, the broker provides stock ratings from Morningstar, while offering a feed of news and analysis from popular websites for each stock. And the app does offer some basic charting functionality too. But its not nearly at the level of full-service brokers such as Charles Schwab or E-Trade. Both of these also offer solid free education for investors who want to power up their skills and knowledge.
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Frequently Asked Questions About Robinhood
Still have questions about opening a Robinhood account? Weve provided answers to some of the questions our readers are most commonly asking.
Yes, Robinhood is a safe platform for investing. Robinhood is a member of the SIPC , meaning your funds are insured up to $500,000. Robinhood is also regulated by the Securities and Exchange Commission .
Further, the Robinhood app is safe to use.
Yes, Robinhood offers a brokerage account as its key offering, but you can also open a cash management account with Robinhood.
Robinhood processes your dividends automatically, crediting cash to your account by default.
Most investors will be fine with Robinhoods free investing accounts. Being a Robinhood Gold member is ideal for margin trading, but we dont recommend this unless you are a more seasoned investor.
Timothy Moore covers banking and investing for The Penny Hoarder from his home base in Cincinnati. He has worked in editing and graphic design for a marketing agency, a global research firm and a major print publication. He covers a variety of other topics, including insurance, taxes, retirement and budgeting and has worked in the field since 2012.
What Is A Margin Call
A margin call occurs when an account’s value falls below a certain amount. When a margin call takes place, the brokerage platform can force the sale of securities or other assets in your account to make up for losses. In order to prevent this from happening, you can either sell off positions or add more of your own funds to the account.
The firm can sell your securities or other assets without contacting you. You are not entitled to a time extension while in a margin call.
With margin investing, the returns on any stocks bought on margin have a greater impact on your account value, whether positive or negative. If the stock loses value, the losses will be deducted from your account valuenot the funds you borrowed. Its absolutely possible for margin to increase your losses.
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Robinhood Is Best For:
Web platform is purposely simple but meets basic investor needs.
Mobile trading platform includes customizable alerts, news feed, candlestick charts and ability to listen live to earnings calls.
Research and data
News available from WSJ Markets, Reuters, Barron’s, CNBC Business and Cheddar. Gold members have access to research from Morningstar, Nasdaq, Nasdaq Totalview level II Market Data for an additional $5 per month.
Customer support options
Email, social media, in-app request-to-call service 24/7.
Are Robinhood Research Reports Worth It
Its critical to note that Robinhood isnt writing the reports they supply to Gold clients. Theyve partnered with Morningstar, one of the largest investment research firms. Gold clients have access to premium company research reports.
Morningstar provides quality research and is an excellent way to get a decent understanding of a company. However, you have to understand that these reports simply aggregate publicly available information from SEC filings, press releases, and news.
Theres no inherent edge in the information.
In order to be right in a big way when investing, you need to have a view that the rest of the market doesnt have.
Whether thats because youre a contrarian or because you see something that the rest of the market doesnt. If the market agrees with you, then your view is mostly factored into the price.
So while these reports can inform you about companies so you can potentially form a unique perspective, the information within isnt proprietary in itself in the way that a buy-side report might be.
You shouldnt treat a favorable rating from Morningstar as a reason to immediately buy the stock.
Analyst reports from Morningstar are meant to be a primer on a company to help you understand where its valuation and financials stand relative to its sector and the broad market and a 30,000-foot view of the bull and bear cases.
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Customer Support And Service
This is another negative of Robinhood’s “no frills” approach: Customer service is primarily handled through the help page on Robinhood’s website, or through its automated chat system. You can email customer service, but it’s tough to get a quick response to a question.
That said, Robinhood has invested heavily in customer support in the past year. It has expanded the available service options and now offers live phone support. It has also tripled the size of its support team in 2020 and plans to hire more people in 2021.
What Is Robinhoods Margin Maintenance Requirement
Robinhood requires investors to have at least $2,000 in portfolio value before they can access margin for trading. But investors designated as pattern day traders must have $25,000 in portfolio value to access margin. The online broker charges 2.5 percent annual interest on margins. The platform used to charge 5 percent interest but halved the amount to entice more investors to purchase a premium Gold account. The interest applies to amounts above $1,000 and is calculated daily.
Even with Robinhood Gold, one thing’s for certain: Trades will remain commission-free.
Robinhood looks at factors like a stocks volatility and market liquidity to determine margin maintenance requirement. Essentially, more volatile stocks will have higher margin maintenance requirements. Robinhood keeps adjusting its margin maintenance requirements based on the volatility and liquidity factors. Therefore, you may start with a margin maintenance requirement of 25 percent on a stock and see it increase to 35 percent.
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What Is The Catch With Robinhood
Unlike most online stock brokers, Robinhood does not offer trading of mutual funds only stocks, ETFs, and crypto, are supported. And while Robinhood does offer commission-free trading, it earns money from your business in a number of ways.
For example, Robinhood receives Payment for Order Flow, or PFOF, from venues where it routes your trades while PFOF is a common industry practice, it may not be fully understood by new traders. Robinhood also may earn a fee from the program banks to which it sweeps funds from customers cash management accounts. The broker also charges $5 per month for its premium Gold Pricing package, which provides Level II real-time data and research reports from Morningstar, in addition to other account service fees, including 2.5% charged for margin accounts with more than $1,000.
Where Robinhood Shines
Costs: Robinhood is a true discount broker although its offerings may not be as robust as some other brokerages, Robinhood has some of the lowest costs in the industry.
Streamlined interface: Robinhood is extremely easy to use. So easy, in fact, some have argued that its made complex trading strategies, such as options trading, too accessible to inexperienced users. However, if your only goal is to dabble in stocks, the trimmed-down interface is highly convenient.
Free cryptocurrency trading: Robinhood is still one of the few brokers that lets you trade cryptocurrencies for free, so among stock brokerages, its a stand out feature. However, if you compare Robinhoods crypto offerings to pure-play crypto brokerages, that shine starts to fade.
IPO access: In 2021, Robinhood unveiled a new offering that lets users take part in a companys initial public offering, or IPO. This has typically been reserved for financial institutions.
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What Is Margin Trading
When you invest on margin, you are borrowing money from your broker to invest in stocks.
This approach appeals to many investors because they can leverage more money without selling off any of their assets.
Though, there are drawbacks .
More on Margin Investing
can result in huge profits, but they are also incredibly risky for several reasons:
- You pay interest on what you borrow for the duration of the investment.
- The longer you hold the stock, the more interest you pay.
- You can lose borrowed money and the value of the cash in your securities account.
- Robinhood can make a margin call if you begin to show great losses.
- When youre in a margin call, you are not entitled to a time extension. The brokerage also does not have to contact you before selling off securities.
So you should certainly put a lot of thought into this type of trading before jumping in headfirst.
Other Robinhood Details You Should Know
Robinhood also offers a cash management account that currently pays 0.30%. The account comes with a debit card and free ATM withdrawals from more than 75,000 ATMs, and offers up to $1.25 million of FDIC insurance thanks to Robinhood’s agreements with several banks.
Robinhood Gold offers investors the ability to trade on margin. The opt-in service carries a flat monthly fee of $5.
New investors should be aware that margin trading is risky. Youre trading on money borrowed from the broker, which means you can lose more than you invest.
Reliability and trustworthiness
Robinhood has been the subject of serious complaints and lawsuits over the years, which potential users shouldnt ignore:
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How Many Cryptocurrencies Are Supported By The Robinhood Platform
Currently, Robinhood offers seven of the biggest cryptocurrencies currently available on the market. Led by Bitcoin, you can buy and sell Bitcoin Cash, Bitcoin SV, Dogecoin, Ethereum, Ethereum Classic, and Litecoin.
Keep in mind that this number will probably continue to grow as some secondary cryptocurrencies grow in market capitalization and popularity like Bitcoin did.
As different coins are added, the options to buy crypto the exchange will continue to grow.
Who Robinhood Is For
With more than 13 million users with an average age of 31, it is clear that Robinhood has positioned itself to be ideal for younger investors who want to get skin in the gameeven if that means in small quantities through fractional shares. Robinhoods overall simplicity makes the app and website straightforward and easy to navigate. If youre interested in trying cryptocurrency investing, Robinhood can help. You will be able to use their platform to trade Bitcoin, Ethereum, and more. Robinhood has also expanded their options trading platform, making the broker a potential choice for options traders, although there are concerns about the quality of trade executions.
Lack of transparency around payment for order flow
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What Is The Downside To Robinhood
Robinhood lacks advanced features including trading tools, and although it’s worth noting that the broker continues to refine and improve its offering, it still lags other brokers in categories such as platforms and tools, mobile, education, research, and offering of investments.
Also, because there are many users on Robinhood who follow the crowd, there can be periods when the platform may be down because many people are trying to do the same thing at once, such as buying a particular security.
Pros And Cons Of Robinhood
Theres a lot to love about Robinhood, especially if you are a new trader. More experienced traders may prefer a different approach to trading, however. Weigh these pros and cons before deciding on a Robinhood brokerage account.
- The educational content is great if you are new to the stock market and want to learn the language.
- The cash management account makes it easy to fund your investments and earn a decent APY.
- You can strategize by combining fractional shares and recurring investments to diversify your assets, no matter how much you have to invest.
- The commission-free trading and no account minimum truly make this accessible to anyone who wants to invest.
- Robinhood gives you the option of investing in cryptocurrency and access to IPOs.
- The mobile app and online trading platform are known for their ease of use.
- There are no account fees, nor are there account inactivity or ACH transfer fees.
- Robinhood is running a promotion wherein you get free stock upon signing up. While most new members will get a stock valued at $10 or less, a lucky few will earn a stock worth up to $225.
- The role Robinhood played in limiting investments in squeeze stocks in early 2021 brought the original mission of the company into question.
- that customer service is especially challenging pre- and post-market, though Robinhood made some changes in 2021 to improve their customer service efforts.
- Robinhood lacks mutual funds and bonds.
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Who Is Robinhood Gold For
Robinhood Gold is appealing to investors who want more access to advanced investing methods. These investors make small investments, so paying commission fees is out of the question. Commission fees can add up and hurt small investors portfolios, but Robinhood Gold charges a flat monthly rate, eliminating that concern.
Its appealing to people who make a large number of stock or ETF trades since they wont have to pay commissions on every trade. In addition, mobile users typically like Robinhood Gold since they can use the app easily on the go.
They Havent Always Had The Best Executions
Robinhood Gold works in ways that arent always obvious but can impact your trading
There are several reasons why this can happen. They get more than other brokers for selling their order flow and have frequent service outages. They have a basic trading platform made for newbies.
Whatever the case, Robinhood customers havent always gotten the best price for their orders.
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