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Robinhood doesn't charge commissions. People on WSB lose money the old-fashioned way: by making stupid trades.

Blammar 6y ago
You'd figure they and a broken clock would be right twice a day (unless it's an electronic clock so broken means it's not showing anything...) Also, read this about Robinhood: https://news.ycombinator.com/item?id=23894228 https://news.ycombinator.com/item?id=23894228
- dehrmann 6y ago
  A clock 1 second fast is never right.
qeternity 6y ago
Robinhood don't charge direct commission, but they do charge commission. It's a bit like traveling and seeing the "no fee" cash exchanges...they don't charge outright fees, they just make their money in the spread. Every market has what's called a bid/offer spread. That's the difference between the price the next buyer will pay, and what the next seller will accept (if the prices were the same, it would result in a trade, and thus back to having different prices). Market makers earn this spread by always being willing to buy low and sell slightly higher. Robinhood traders are largely unsophisticated and place market orders that cross this spread and thus incur the implicit cost. Market making has become to automated that these small spreads (pennies in many cases) are actually extremely lucrative. So, Robinhood goes out to a market maker and says "you can execute all my trades for me, but you'll have to pay me for the privilege because I know you'll make a lot of money off my trades". This is called payment for order flow, and Robinhood makes a lot of money this way.
- SifJar 6y ago
  This is true, but not overly relevant in this context - the reason lack of commission was mentioned was because someone said that fees will eat away at a day trader's profits before a down market will affect them; with Robinhood or other commission-free brokers, that will not be the case (regardless of how the broker is profiting off the trades - the trader is still going to be getting the best price available on the market, as required by law)
- ac29 6y ago
  The bid-ask spread on most stocks is 0.01. You'd need to trade a LOT for this to actually make any real difference in your returns. Given that the average size of account at Robinhood is something like $5000, I dont think the average trader there is really getting fleeced by market makers. The bid-ask spread on some of the questionable options Robinhood traders are transacting in is quite a bit higher, though.
  - qeternity 6y ago
    You fail to grasp the size of the equities market, as well as tangential trading opportunities. Also options market making against retail is absurdly profitable. There’s a reason Citadel is paying tens of millions of the privilege of executing these trades. Source: former head of quant trading for multi billion dollar hedge fund

You'd figure they and a broken clock would be right twice a day (unless it's an electronic clock so broken means it's not showing anything...) Also, read this about Robinhood: https://news.ycombinator.com/item?id=23894228 https://news.ycombinator.com/item?id=23894228

dehrmann 6y ago
A clock 1 second fast is never right.

qeternity 6y ago

Robinhood don't charge direct commission, but they do charge commission. It's a bit like traveling and seeing the "no fee" cash exchanges...they don't charge outright fees, they just make their money in the spread. Every market has what's called a bid/offer spread. That's the difference between the price the next buyer will pay, and what the next seller will accept (if the prices were the same, it would result in a trade, and thus back to having different prices). Market makers earn this spread by always being willing to buy low and sell slightly higher. Robinhood traders are largely unsophisticated and place market orders that cross this spread and thus incur the implicit cost. Market making has become to automated that these small spreads (pennies in many cases) are actually extremely lucrative. So, Robinhood goes out to a market maker and says "you can execute all my trades for me, but you'll have to pay me for the privilege because I know you'll make a lot of money off my trades". This is called payment for order flow, and Robinhood makes a lot of money this way.

SifJar 6y ago
This is true, but not overly relevant in this context - the reason lack of commission was mentioned was because someone said that fees will eat away at a day trader's profits before a down market will affect them; with Robinhood or other commission-free brokers, that will not be the case (regardless of how the broker is profiting off the trades - the trader is still going to be getting the best price available on the market, as required by law)
ac29 6y ago
The bid-ask spread on most stocks is 0.01. You'd need to trade a LOT for this to actually make any real difference in your returns. Given that the average size of account at Robinhood is something like $5000, I dont think the average trader there is really getting fleeced by market makers. The bid-ask spread on some of the questionable options Robinhood traders are transacting in is quite a bit higher, though.
- qeternity 6y ago
  You fail to grasp the size of the equities market, as well as tangential trading opportunities. Also options market making against retail is absurdly profitable. There’s a reason Citadel is paying tens of millions of the privilege of executing these trades. Source: former head of quant trading for multi billion dollar hedge fund