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Robinhood’s big gamble

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Re: Robinhood’s big gamble

#121

Post by sithlord »

sniperjzp wrote: post #32
sithlord wrote: post #10

Earlier quoted context omitted.

Although robinhood's app was pretty revolutionary, I think their real "innovation" was removing the cost of trades, basically forced the entire market to remove that. Before, it would cost 4.99+ to execute a trade, so if you were not buying significant amounts that could EASILY eat up a lot of profits.

It’s looks like free but it isn’t, RH makes money by selling trading requests to high frequency trading firms like Citadel, which buy/sell before the actual order in a better position so they can earn a penny from selling to or buying from you. The more transactions, the more they earn. - https://fortune.com/2020/07/08/robinhood-makes-millions-sell...

robinhood isnt the only one selling their requests, they basically all do it.

I'm not a robinhood fan - I moved all the investments I had out of their years ago. But, to think they are the only one selling order flow is disingenuous

Re: Robinhood’s big gamble

#122

Post by JakeTheAndroid »

NortySpock wrote: post #30
dcolkitt wrote: post #24

Earlier quoted context omitted.

The basis of US securities law is that rich people ("accredited investors") know enough to be responsible to take risks. Whereas poor people are too stupid to make risky investments without turning into degenerate gamblers. A lot of debates about financial regulation basically come down to whether this is a good principle or not. Too many times, both sides are arguing at cross purposes, because one implicitly assumes…

"Rich people" can also afford time / money / labor costs to do independent due diligence to confirm if a company's finances are true and correct, or an elaborate sham.

Yet WeWork happened still. And tons of investors get screwed by scams or companies completely lying.

Makeup company Coty couldn't verify Kylie Jenners companies earning and once they audited it they found out that it wasn't making nearly as much as they thought.

So it's not like its uncommon for investors to get taken for a ride. Why should we then treat them differently than lower income investors?

Re: Robinhood’s big gamble

#123

Post by Dah00n »

suifbwish wrote: post #114
Someone1234 wrote: post #21

I have a Schwab brokerage account, until recently I could trade OTCs and can still trade warrants and futures. These are riskier securities than common stock. None of which is possible on RH as far as I know. When I created my Schwab account I received and was offered no specific training, and largely learned how to trade on YT, Investopedia, and articles. My point is this: RH has become the media's favorite whipping…

We don’t have a responsibility ethical or otherwise to protect adults from themselves. Any argument to the contrary is an appeal to emotion at best.

Sure we do. That is why almost everywhere on earth it is illegal to drive a motorcycle without a helmet for example. Laws aren't made just to piss people off or create a thriving helmet industry. They are there to make it harder to fall into the stupidity trap.

Re: Robinhood’s big gamble

#124

Post by kasey_junk »

SmellTheGlove wrote: post #41
Someone1234 wrote: post #21

I have a Schwab brokerage account, until recently I could trade OTCs and can still trade warrants and futures. These are riskier securities than common stock. None of which is possible on RH as far as I know. When I created my Schwab account I received and was offered no specific training, and largely learned how to trade on YT, Investopedia, and articles. My point is this: RH has become the media's favorite whipping…

Schwab doesn't have outages during sell-offs of very visible investments, though. Hasn't Robinhood hit the rocks pretty hard during GME and DOGE sell-offs recently? The reason I won't use them is because I don't think I'm their customer - whoever is paying for the order flow is, and I don't trust their platform to be available in the middle of turbulence. EDIT: I get it - Schwab also had visible outages. Sorry for th…

It’s worth noting that fidelity does take payment for order flow for some orders: https://clearingcustody.fidelity.com/app/item/RD_13569_21696...

Re: Robinhood’s big gamble

#125

Post by cyril_st_john »

sniperjzp wrote: post #32
sithlord wrote: post #10

Earlier quoted context omitted.

Although robinhood's app was pretty revolutionary, I think their real "innovation" was removing the cost of trades, basically forced the entire market to remove that. Before, it would cost 4.99+ to execute a trade, so if you were not buying significant amounts that could EASILY eat up a lot of profits.

It’s looks like free but it isn’t, RH makes money by selling trading requests to high frequency trading firms like Citadel, which buy/sell before the actual order in a better position so they can earn a penny from selling to or buying from you. The more transactions, the more they earn. - https://fortune.com/2020/07/08/robinhood-makes-millions-sell...

As others in this thread have noted, what you described would be illegal. But suppose for the sake of argument that Robinhood's order flow is actually really bad and users are getting a measurably worse price through RH vs other brokers. RH targets small-time investors who are trading in small amounts - perhaps investing a bit of their paycheck every week. It seems unlikely that the order flow would be so bad that RH users are losing anywhere close to $5 per trade because of it.

So even if "it's not really free" it's still a significant discount compared to the pricing that was standard before RH came along. Opening up investing to more people by making smaller & more frequent trades feasible seems generally good to me.

I will admit that other aspects of Robinhood's business such as the degree of gamification are still concerning, though.

Re: Robinhood’s big gamble

#126

Post by google2142 »

CarelessExpert wrote: post #112
stickfigure wrote: post #109

Earlier quoted context omitted.

>> Do they need to make their UI flow less smooth, or give some big warning that people are dealing with real money? >Yes. Absolutely. Why would that be a problem? Are you proposing that this warning can't be disabled or permanently dismissed? As an adult consumer I do NOT want this.

Why not? Are you trading so often that a bit of additional friction is an issue? If so, a) you should reconsider, that's generally a good way to lose money, and b) you're probably classified as a pattern day trader, anyway, and you're already subject to a (very mild) speedbump: https://robinhood.com/us/en/support/articles/pattern-day-tra... > Pattern Day Trade Protection alerts you when you’ve placed three day trades…

You're truly live up to your username lol

"you should reconsider, that's generally a good way to lose money" Some people make money off of doing this, you have no right to prevent people from day trading if that's what they want to do.

" you're probably classified as a pattern day trader, anyway, and you're already subject to a (very mild) speedbump:" This only applies if you have less than $25k in assets which most HN users probably have in excess of.

It seems like you clearly have a bias against robinhood without knowing the full reasons for why it's succeeded and how it's changed the brokerage industry for the better.

Re: Robinhood’s big gamble

#127

Post by s1artibartfast »

andreilys wrote: post #37
liquidise wrote: post #8

Articles like this strike me as FUD no matter how hard i try and read them another way. "Risk" is such a wide spectrum when it comes to financial investments. Just look at the crypto crash today, and there are hundreds of billions invested there still. Robinhood giving younger people access to options is hardly a doomsday risk scenario in my mind. Robinhood may well be responsible for a generation gaining investment…

Or they end up spending the next 10-20 years paying off margin and credit card lines they used to invest in high risk assets. This guy literally maxed out credit cards and bought doge on margin. https://www.nytimes.com/2021/05/14/technology/hes-a-dogecoin...

Isn't this the point of bankruptcy. If this guy ends up bankrupt, it will be signal to future creditors that maybe they aren't the most prudent investor.

From the other perspective, isn't it the individuals risk to take? Even if it is essentially gambling, this is something that people are allowed to do. Why would a person be permitted to bet their life savings and max credit on black in a casino, but not some speculative coin?

Random fact: Terrance Watanabe may be the largest looser in the history of las vegas gambling, having lost over 220M over a 5 year period. He was also sued by Casinos for over 15M of credit they provided him to gamble with.

Re: Robinhood’s big gamble

#128

Post by notyourwork »

annexrichmond wrote: post #33
notyourwork wrote: post #3

The internet makes risky behavior more accessible by very nature of connectivity. You can talk to someone on the other side of the world with much less friction. Similarly, a fintech company like Robinhood decided to make stock trading more modern and reduce the barrier to entry. Granted, this wasn't really a big change in accessibility if you wanted to trade stocks. One could simply goto Fidelity ore other brokers a…

All the annoying emojis and push notifications talking to me like I’m an ignorant child trading stocks (“HOORAY!! YOU GOT DIVIDEND HIGH FIVE ”) is what made me realize this app wasn’t for me. I guess that’s exactly what to expect when you apply that SV-type growth hacker PMs to a trading platform.

Agreed, I typically disable push on most apps because they are regularly worthless and not helpful.

Re: Robinhood’s big gamble

#130

Post by [deleted] »

google2142 wrote: post #126
CarelessExpert wrote: post #112

Earlier quoted context omitted.

Why not? Are you trading so often that a bit of additional friction is an issue? If so, a) you should reconsider, that's generally a good way to lose money, and b) you're probably classified as a pattern day trader, anyway, and you're already subject to a (very mild) speedbump: https://robinhood.com/us/en/support/articles/pattern-day-tra... > Pattern Day Trade Protection alerts you when you’ve placed three day trades…

You're truly live up to your username lol "you should reconsider, that's generally a good way to lose money" Some people make money off of doing this, you have no right to prevent people from day trading if that's what they want to do. " you're probably classified as a pattern day trader, anyway, and you're already subject to a (very mild) speedbump:" This only applies if you have less than $25k in assets which most…

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