“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…
Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.
While we're on that subject, Pattern Day Trading restrictions[0] are a fine example of how arbitrary regulations created with good intentions can lead to negative outcomes.
How it works is that margin accounts must maintain an equity balance of at least $25,000 in order to day trade freely. Otherwise, you're allotted three round-trip day trades within a 5-day period before there's serious consequences. Cash accounts are subject to long settlement periods, so the restrictions are moot in that case.
What this means is that you can't trade equities with any sort of frequency on an account that has a cash balance below $25k—at least not if you want anywhere near full utilization of your capital. That also rules out algorithmic trading on anything but medium or long timescales.
The "protection" afforded to the uninformed retail customers it was designed to protect is questionable at best. For example: it would be perfectly acceptable to allocate 100% of your portfolio plus leverage to a single stock just before market close, become subject to after-hours and pre-market price movement, then sell the next morning. Repeat by buying a different stock that same day.
Yet, round-trip trades during market hours are heavily discouraged to the point of prohibition beyond any number that isn't trivial.
In fact, I would argue that PDT restrictions create a perverse incentive that holds people to bad trades which they would otherwise prefer to exit, subjecting them to dangerous after-hours price movement in the process.
It also creates incentive for novices to abandon equities entirely in favor of forex markets. Not exactly risk reduction.