How the Robinhood Stock Trading app makes money?

How the Robinhood Stock Trading app makes money?

TripontechMay 3, 20179min380
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The Robinhood applications is a stock brokerage that allows individuals to buy and sell stocks for 0$ a trade. By doing so, the company aims to engage the highly important demographic of the millennials.

Before its official launch in late 2014 on App Store, the company had a half a million long waitlist. Now, it’s available for both Android and Apple devices. 

Registering for Robinhood 

Individuals must fill out an application upon signing for the app. New users receive introductory videos explaining the idea of the app and how to make trades. You will need around 80 seconds to get to know the app as it is quite simplistic and easy-to-use. 

People can buy or sell at a market price, make limit orders and stop them when they’re losing money. Unfortunately, there aren’t any trading tools available as of this moment. Luckily for some, there’s no minimum account requirements, which means that you can invest as little as you want. 

The design is simplistic and changes colors depending on your performance with the stocks. There’s a variety of convenient features such as putting stocks in a watchlist, reading information about a particular stock and reviewing your overall performance. 

Why are they offering $0 trades? 

At the beginning of the century, all services aimed to become more sophisticated by providing a large number of features. In current days, the most successful corporations seek to streamline a product or a service, making it more simplistic. That’s the sole idea behind Robinhood, which wants to motivate Millennials to become the next successful investors.

They are creating their own niche, which motivates youngsters to invest without being scared of the additional price tags and features that other trading companies provide. 

Acknowledged critics are worried that inexperienced investors should not have the ability to buy & sell stocks easily as it could disturb the market. 

However, Robinhood believes that the young people should be able to invest easily as they have their own personal financial issues. It’s hard to live normally and have money to invest when you have a student loan, for example. Thus, this application provides an inexpensive way to gamble on the stock market and make a fortune. Who knows, maybe you are the new stock market oracle? 

To function Robinhood needs to make profits. If the company wants to compete with others, they must find a way to make profits, or they might be overwhelmed by the expenses, sooner or later. 

The inexpensive cheap trades lead to thin margins, and this leads to a variety of compromises for the firm. Whether it will be customer’s services, tools or anything else, they have to cut somewhere in order to function. 

Currently, the company works by having no physical locations, a small staff, and little or no marketing campaigns. However, the company does make some money off unused cash deposits from accounts. 

A great sign for the company is that a significant number of venture capitalists invest in it. Currently, large investors such as Google Ventures, Social Leverage, Ribbit Capital and Index Ventures have raised more than $176 million for the company in funding, which has led to a valuation of $1.3 billion. 

At the end of 2016, the company released a gold membership which provides the possibility to trade pre and after hours and allows you to deposit immediately. 

From what we see, the company is ready to maneuverer to establish itself as a trusted brokerage player. Whether Robinhood is going to become a game changer, we have to wait as only time will show. 

The application is highly useful for individuals who are new to the stock market and need to gain valuable experience. After expanding enough in the millennials demographic, the company should focus on attracting experienced investors. One thing is sure, Robinhood is going to make investing in the stock market easier for everyone!

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