10 ms·

I think folks are overthinking this. The math itself doesn't matter. Have you seen recent Robinhood commercials popping up on TV? Their whole business is to en

I think folks are overthinking this. The math itself doesn't matter. Have you seen recent Robinhood commercials popping up on TV? Their whole business is to encourage folks that should not be day trading to day trade. Having your money parked there just facilitates knee-jerk-reaction and follow-the-crowd trading.

deleted 8y ago
[deleted]
JumpCrisscross 8y ago
> Their whole business is to encourage folks that should not be day trading to day trade Less cynically, it’s building a book of investors who have likely never lost money in the stock market.
- rconti 8y ago
  It doesn't really matter; they're making the spread anyway, whether you make money or lose money.
- HenryBemis 8y ago
  Or Forex market. With carefuul activity Forex can make an 'easy' 20% per year. Stocks I would assume would give a 7-10%. Knowing that RH gambles your money, it gives them plenty of profit :)
  - deleted 8y ago
    [deleted]
kypro 8y ago
From what I understand Robinhood ban people who day trade.
- subraizada3 8y ago
  The SEC and FINRA (regulatory agencies) don't allow day trading for accounts with balances less than $25,000. If you exceed 3 (?) day trades in the past 5 days, your account is locked from day trading for 90 days (so if you buy a stock you will be unable to sell it that day). All exchanges enforce this rule, not just Robinhood.
  - zackmorris 8y ago
    I hope this gets challenged in court at some point. The rules went into effect on September 28, 2001 as a knee-jerk reaction to the dot bomb and 9/11: http://www.finra.org/investors/day-trading-margin-requirements-know-rules http://www.finra.org/investors/day-trading-margin-requiremen... The real story is that the plebes realized they could make 2% per day by day trading and selling short. I did this with my dad and we were up about $40k before 9/11 wiped out most people's gains (this was back when Apple stock was in the $12-20 range). Edit: my dad never sold short because he felt it was unsupportive of companies, but had he done it to balance each of the buy/sell targets I gave him, he would have been up $80k. I remember being demoralized that I couldn't trade on margin because I would likely never be able to save $25k with my student loan and credit card debt. But if I read the rules correctly now, I don't even think you can sell short anymore unless you have $25k. This keeps the real day trading profits back in the hands of the rich and I feel that it could/should be challenged as discrimination. Also it breaks the ZOI rule so doesn't sit right with me..
    - 55555 8y ago
      > The real story is that the plebes realized they could make 2% per day by day trading and selling short. Can you please elaborate? I'm curious. Why was the money so "easy"? Simply because there were so many amateur traders?
      - asdff 8y ago
        Intraday trading is much less risky than holding a position overnight. A lot of movement happens in the first and last 30 mins of trading, and over lunch. You can exit unproductive positions quickly, whereas if you couldn't day trade you'd only be able to sit and watch how the cards are falling.
sonnyblarney 8y ago
" Their whole business is to encourage folks that should not be day trading to day trade" Also using the ridiculously upside down moral convention that they are somehow 'the good guys defeating the system' i.e. 'Robin Hood'. "We wanted to do something after occupy Wall Street, you know. Something real. So, how about, get all the young people to, you know, put their money into Wall Street" is basically their 'storyboard motivation'. Which the CNN interviewer accepted without a hint of skepticism.
- motivated_gear 8y ago
  It's amazing how many times I've seen people post losses in excess of $20,000 on r/wallstreetbets.
  - deleted 8y ago
    [deleted]
  - jkqwzsoo 8y ago
    The people in r/wallstreetbets usually understand that they're making stupid bets. OTOH, r/Robinhood is full of completely irresponsible traders -- trading in illiquid securities, dumping tons of money in penny stocks, triggering PDT restrictions and getting stuck with unwanted positions, not understanding bid/ask/mark (usually blaming RH or the "market maker" boogeyman for changing the price on them), buying OTM weekly options (known informally on wallstreetbets as "FD"s...), complaining about tons of "glitches" that are actually just them losing money through ignorance, and (one that has always confused me) blaming all losses on some mysterious "market maker" boogeyman who kills all of their trades. If it was 1996, these people would be speculating on Beanie Baby portfolios hedged with Charizard cards.
    - Apocryphon 8y ago
      Given the millennial user base, they probably were.
      - Derek_MK 8y ago
pmart123 8y ago
Well, every broker is incentivized to get its customers to trade as much as possible, ie, “make you change your mind often.” This is why brokers promote real-time news, information, focus on earnings reports, etc. Even on the institutional side, the business is setup to encourage investors to change their mind as much as possible. More trading equals more soft dollars equals getting a larger budget for research. More trading/using more esoteric products means you’ll get more help from Cap Intro to raise money. It takes a lot of restraint to invest like Buffett.
del82 8y ago
> Their whole business is to encourage folks that should not be day trading to day trade See also E-Trade's "Don't get mad, get E-Trade" commercials[0], which are clearly intended to give people the impression that stock trading will make them Super-Yacht rich. [0] https://www.youtube.com/playlist?list=PLHVKU2qFM7q2HuTv5RCU0j93imelFtrAI https://www.youtube.com/playlist?list=PLHVKU2qFM7q2HuTv5RCU0...
_raoulcousins 8y ago
Yeah. It's awful. They've been advertising on a pop culture podcast I listen to, with the host reading copy about how he buys stocks on Robin Hood. Seems irresponsible, especially for a podcast that isn't remotely related to finance.
asdff 8y ago
> Their whole business is to encourage folks that should not be day trading to day trade Trading for most people used to be deliberately obtuse. $7.5 commission per trade is criminal for most people, so is charging $50 a month to get a weekly email with basic technical analysis, but that's literally been the bread and butter of retail investing for decades and no one bats an eye to how deliberately ridiculous it all is. Robinhood drops all the barriers from buying stocks, gives you a warning before they even let you touch options, and they are the evil here? This is like saying venmo is dumb because it lets people wipe out their checking account quicker than writing a check; don't blame the company for idiotic users. Robinhood doesn't even let you day trade more than 4x in a given week unless you have 25k in your trading account, just like every brokerage.
- doctorpangloss 8y ago
  > Trading for most people used to be deliberately obtuse. When Robinhood initiates options trading by asking you, "Do you think the stock is going to go up?" on a phone interface, they've decided that trading is now just for morons.
  - stevewodil 8y ago
    Hahaha, I love this comment because when I'm trying to buy options it always makes me chuckle how they allow these type of people to trade naked options
    - superfrank 8y ago
      You can't buy a naked call/put. Naked, covered, and cash secured are terms used to describe how you are covering your downside when you are selling options. When you buy an option, your downside is always the cash you spent on the option, so you don't have different types of purchases. When you buy you are just buying an option. As for Robinhood, they don't allow for selling of naked options, only covered and cash secured.
      - stevewodil 8y ago
robot 8y ago
It's all about the math. It is true they encourage unsophisticated people to go stock trading. But that's not how they do business. They find gaps in the financial institutions' way of doing business and fill the space.
adrr 8y ago
That is because they sell their order flow to the market makers. They get a rebate on every trade. I bet that is how they make a majority of their revenue.
javaIsGreat 8y ago
Appreciate the comment. And, https://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2018-12-14/sipc-says-it-has-serious-concerns-about-robinhood-s-new-product https://www.google.com/amp/s/www.bloomberg.com/amp/news/arti...

deleted 8y ago

[deleted]

JumpCrisscross 8y ago

> Their whole business is to encourage folks that should not be day trading to day trade Less cynically, it’s building a book of investors who have likely never lost money in the stock market.

rconti 8y ago
It doesn't really matter; they're making the spread anyway, whether you make money or lose money.
HenryBemis 8y ago
Or Forex market. With carefuul activity Forex can make an 'easy' 20% per year. Stocks I would assume would give a 7-10%. Knowing that RH gambles your money, it gives them plenty of profit :)
- deleted 8y ago
  [deleted]

kypro 8y ago

From what I understand Robinhood ban people who day trade.

subraizada3 8y ago
The SEC and FINRA (regulatory agencies) don't allow day trading for accounts with balances less than $25,000. If you exceed 3 (?) day trades in the past 5 days, your account is locked from day trading for 90 days (so if you buy a stock you will be unable to sell it that day). All exchanges enforce this rule, not just Robinhood.
- zackmorris 8y ago
  I hope this gets challenged in court at some point. The rules went into effect on September 28, 2001 as a knee-jerk reaction to the dot bomb and 9/11: http://www.finra.org/investors/day-trading-margin-requirements-know-rules http://www.finra.org/investors/day-trading-margin-requiremen... The real story is that the plebes realized they could make 2% per day by day trading and selling short. I did this with my dad and we were up about $40k before 9/11 wiped out most people's gains (this was back when Apple stock was in the $12-20 range). Edit: my dad never sold short because he felt it was unsupportive of companies, but had he done it to balance each of the buy/sell targets I gave him, he would have been up $80k. I remember being demoralized that I couldn't trade on margin because I would likely never be able to save $25k with my student loan and credit card debt. But if I read the rules correctly now, I don't even think you can sell short anymore unless you have $25k. This keeps the real day trading profits back in the hands of the rich and I feel that it could/should be challenged as discrimination. Also it breaks the ZOI rule so doesn't sit right with me..
  - 55555 8y ago
    > The real story is that the plebes realized they could make 2% per day by day trading and selling short. Can you please elaborate? I'm curious. Why was the money so "easy"? Simply because there were so many amateur traders?
    - asdff 8y ago
      Intraday trading is much less risky than holding a position overnight. A lot of movement happens in the first and last 30 mins of trading, and over lunch. You can exit unproductive positions quickly, whereas if you couldn't day trade you'd only be able to sit and watch how the cards are falling.

sonnyblarney 8y ago

" Their whole business is to encourage folks that should not be day trading to day trade" Also using the ridiculously upside down moral convention that they are somehow 'the good guys defeating the system' i.e. 'Robin Hood'. "We wanted to do something after occupy Wall Street, you know. Something real. So, how about, get all the young people to, you know, put their money into Wall Street" is basically their 'storyboard motivation'. Which the CNN interviewer accepted without a hint of skepticism.

motivated_gear 8y ago
It's amazing how many times I've seen people post losses in excess of $20,000 on r/wallstreetbets.
- deleted 8y ago
  [deleted]
- jkqwzsoo 8y ago
  The people in r/wallstreetbets usually understand that they're making stupid bets. OTOH, r/Robinhood is full of completely irresponsible traders -- trading in illiquid securities, dumping tons of money in penny stocks, triggering PDT restrictions and getting stuck with unwanted positions, not understanding bid/ask/mark (usually blaming RH or the "market maker" boogeyman for changing the price on them), buying OTM weekly options (known informally on wallstreetbets as "FD"s...), complaining about tons of "glitches" that are actually just them losing money through ignorance, and (one that has always confused me) blaming all losses on some mysterious "market maker" boogeyman who kills all of their trades. If it was 1996, these people would be speculating on Beanie Baby portfolios hedged with Charizard cards.
  - Apocryphon 8y ago
    Given the millennial user base, they probably were.
    - Derek_MK 8y ago

pmart123 8y ago

Well, every broker is incentivized to get its customers to trade as much as possible, ie, “make you change your mind often.” This is why brokers promote real-time news, information, focus on earnings reports, etc. Even on the institutional side, the business is setup to encourage investors to change their mind as much as possible. More trading equals more soft dollars equals getting a larger budget for research. More trading/using more esoteric products means you’ll get more help from Cap Intro to raise money. It takes a lot of restraint to invest like Buffett.

del82 8y ago

> Their whole business is to encourage folks that should not be day trading to day trade See also E-Trade's "Don't get mad, get E-Trade" commercials[0], which are clearly intended to give people the impression that stock trading will make them Super-Yacht rich. [0] https://www.youtube.com/playlist?list=PLHVKU2qFM7q2HuTv5RCU0j93imelFtrAI https://www.youtube.com/playlist?list=PLHVKU2qFM7q2HuTv5RCU0...

_raoulcousins 8y ago

Yeah. It's awful. They've been advertising on a pop culture podcast I listen to, with the host reading copy about how he buys stocks on Robin Hood. Seems irresponsible, especially for a podcast that isn't remotely related to finance.

asdff 8y ago

> Their whole business is to encourage folks that should not be day trading to day trade Trading for most people used to be deliberately obtuse. $7.5 commission per trade is criminal for most people, so is charging $50 a month to get a weekly email with basic technical analysis, but that's literally been the bread and butter of retail investing for decades and no one bats an eye to how deliberately ridiculous it all is. Robinhood drops all the barriers from buying stocks, gives you a warning before they even let you touch options, and they are the evil here? This is like saying venmo is dumb because it lets people wipe out their checking account quicker than writing a check; don't blame the company for idiotic users. Robinhood doesn't even let you day trade more than 4x in a given week unless you have 25k in your trading account, just like every brokerage.

doctorpangloss 8y ago
> Trading for most people used to be deliberately obtuse. When Robinhood initiates options trading by asking you, "Do you think the stock is going to go up?" on a phone interface, they've decided that trading is now just for morons.
- stevewodil 8y ago
  Hahaha, I love this comment because when I'm trying to buy options it always makes me chuckle how they allow these type of people to trade naked options
  - superfrank 8y ago
    You can't buy a naked call/put. Naked, covered, and cash secured are terms used to describe how you are covering your downside when you are selling options. When you buy an option, your downside is always the cash you spent on the option, so you don't have different types of purchases. When you buy you are just buying an option. As for Robinhood, they don't allow for selling of naked options, only covered and cash secured.
    - stevewodil 8y ago

robot 8y ago

It's all about the math. It is true they encourage unsophisticated people to go stock trading. But that's not how they do business. They find gaps in the financial institutions' way of doing business and fill the space.

adrr 8y ago

That is because they sell their order flow to the market makers. They get a rebate on every trade. I bet that is how they make a majority of their revenue.

javaIsGreat 8y ago

Appreciate the comment. And, https://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2018-12-14/sipc-says-it-has-serious-concerns-about-robinhood-s-new-product https://www.google.com/amp/s/www.bloomberg.com/amp/news/arti...