Is Robinhood Stock Trading a Scam? 5 Brutal Truths Revealed!

If you see this post, then you’re probably doing a bit of research on the trading platform that goes by Robinhood’s name and asking yourself: 


Is Robinhood Stock Trading a scam, or can I really make money with this app?


Suppose I guessed correctly, then congratulations because you came to the right spot. This article is dedicated to revealing the truths behind this popular trading app to know if you can trust it or go another route. 

Ever since I started this blog, it has always been my goal to provide my readers with high quality and well-researched content about websites and platforms that promise to help build wealth. 

Because of this, I have decided to craft this review to help you determine if you should sign up as a trader or steer away and find another better solution instead. 

The pandemic came at a time when we least expected it. It is surprising how fast we can adapt to the changing times as reflected by the quick shift from the norm in terms of how we react, think, and move.

What is even more surprising is that more and more people became conscious about their financial well-being, which promoted most of them to join several profit-earning schemes online. 

While it is true that there are a significant number of ways by which one make money fast, investing and trading seems to be on the top 10 list of every listicle.

As highlighted by Entrepreneur, trading may earn you quick cash, but it does not guarantee profit since the concept itself is actually quite tricky and risky for beginners, especially those that aren’t adequately trained. 

One of the surprising news as of present is that the stock market is currently experiencing a new wave of fresh (and young!) participants. 

The Wall Street Journal featured that a vast number of individuals who are stuck at home have turned to trade with the hopes of purchasing popular products such as bonds and funds, stocks, cryptocurrencies, and gold.

I believe that one of the reasons for this surge in the number of accounts opened is that more and more online platforms and brokerage applications are being developed.

One example of that is the Robinhood Trading App, which has attracted millennials primarily because of its zero-commission trading scheme.


Before I march on with my review, let me first give you a word of advice…

You may have or may not have seen online posts about how much profit one can get from trading individual stocks both in the long and short term, but please remember that trading is NOT for the faint of heart.

You cannot just dive and invest your hard-earned money without setting up a solid trading plan. Now that I have warned you, buckle up as I present the classified facts for this new cult-favorite app.


What is The Robinhood Stock Trading App?

Is it me, or does the name of this app sound familiar? Well, you guessed it right. The company is named after the popular thief who robbed the affluent people just to give to the less fortunate.

Despite many competitions in the market, Robinhood is quickly becoming the center of attention in the financial industry with its “too good to be true” system.

This trading platform is an app-based stock brokerage similar to Fidelity, TD Ameritrade, and E*Trade. It has dubbed itself as a tool which “democratizes” finance for everyone as it offers commission-free trading with a low minimum investment.

Based on their website, the driving force behind the development of this app is the intense passion for helping the masses access financial markets.

It was founded by the power-duo, Baiju Bhatt and Vlad Tenev, back in 2014 in California. Baiju Bhatt has a master’s degree in mathematics and a degree in physics, both taken from Stanford University.

On the other hand, Vlad Tenev also holds a master’s degree in mathematics from the University of California and a bachelor’s degree in Mathematics from Stanford University.

As of writing, the app proves its supremacy with over 3.1 million downloads online. Its social media accounts also sport a great number of followers – (1) 168,167 on Facebook, (2)116,000 on Instagram, (3) 193,300 on Twitter, and (4) 102,035 on LinkedIn.what is the robinhood trading app The company leverages technology to motivate people from all walks of life to participate in the financial system.

Navigation wise, the website and app’s user interface seems to be simple, clean, and minimalist. Such a structure can enhance user satisfaction as it aims not to overwhelm beginners with lots of charts and red markings.

True to their words that “investing is made easy through Robinhood,” they have made the platform available for download both in Google’s Playstore and in the AppStore.

Backed by 10 of the world’s most notable investors, Robinhood Financial is quickly rising as a dominant force in the field of investments.

One of the many reasons for that is the application’s ability to allow beginners with minimum resources to learn from the financial market’s actual state through the financial news aggregator and real-time market data.

There were reports that the trading statistics can fluctuate from time to time in terms of trading research and analysis. I have observed that Robinhood does not disclose enough statistics for someone who has used a similar app.

I know that this is probably because the trading is usually in small quantities. Still, honestly, if the app wants to stay competitive, they should improve on that since it can boost the customers’ knowledge regarding prices. 

After all, education for all investors is part of their commitment.


What services does the Robinhood application offer?

Are you reaching for your pockets to open up an account with the app? With its simple UI, navigating your way to sign-up and fund your money can be as easy as 1, 2, 3. 

In terms of its services, Robinhood is safe and is regulated by SEC, SIPC, and FINRA. The application basically offers five significant assets:

For stocks and funds, you can invest as little as $1 thru its factional shares system. There, users are free to choose how much they want to invest in, and the app itself will convert it into smaller parts.

Personally, I think that this is a sustainable way for beginners who are testing the waters in trading real-time and building their portfolio.

The company also offers trading options to execute their trading plans on bullish or bearish investments for sophisticated investors. 

Please note that this form of trading poses significant risks, making it inappropriate for beginners who have no clear investment objectives and plans before the actual trade.

The application also offers a cash management system or savings account that comes with a Mastercard debit card. As of writing, Robinhood disclosed that the interest is around 0.30% APY (which is surprisingly competitive to other savings accounts).

I love this one because it has no minimum amount for set-up, FDIC insured, no monthly fee, and no overdraft fee!

Robinhood is a registered cryptocurrency platform. The application allows users to buy and sell popular cryptocurrencies such as Bitcoin and Ethereum any time throughout the day.

While you may have heard of shocking profits from this one, note that the crypt market is a volatile one, which means that it is possible to suffer from extreme financial losses and wins.

For $5 a month, Robinhood Gold is deemed by the company as a premium offer that allows further access to several functions- margin trading, pre and after-hours market trading, instant reinvestment, and a leveled-up market data for research.

While the company does not commonly advertise it, I also found out that you can get free stock shares by merely opening an account and referring your friends.

The value of the surprise stock can range from $2.50 to even $205! However, the stock shares are randomly chosen from Robinhood’s inventory, so you have no control over what will be given to you.


How does Robinhood make money from its Users?

I know what you are thinking. With no commission, start-up, or even an annual fee, how exactly does this “revolutionary” company make money?

Based on my research, there seem to be four major ways by which they earn:

  1. from the premium Robinhood Gold for about $5 per month
  2. from interests when they allow users up to $1,000 margin
  3. from rebates from market makers whenever you buy or sell stocks, options, and ETFs
  4. from Sutton Bank, the financial partner who issues debit cards for the company.


Robinhood Stock Trading: Ugly Truths Revealed!

Here’s the thing, if you are a beginner who is in the market to learn more about trading and investing, you might want to invest in yourself first rather than diving into the market right away.

Robinhood may be considered a good platform if you want to test the waters, but other alternatives can help you earn more without being sucked into the market’s craziness.


As I have warned you at the beginning of the article, trading isn’t for everyone.

For beginners, please remember that just because the app is heavily marketing the words “commission-free” does not mean that it is a viable option.

For professional traders, please note my review above states that the app DOES NOT have enough charts, screeners, and analysis, unlike other brokers.

To help you decide whether you should join or not, I have listed below the five brutal truths I realized while I was reviewing this popular trading app.


1. Solid profits call for serious investments

Have you heard of the saying: “never put all your eggs in one basket”? While the brokerage is free for Robinhood, you cannot gain without investing a solid amount of money.Is Robinhood Stock Trading a Scam Contrary to the beliefs that you can start investing in small amounts, time proves again and again that those who have invested a lot will have significant profits than those who started up small.

Knowing this, many young traders are investing all their money in this financial basket without realizing the consequences.

2. The risks are too high!

Using the app boils down to this: What exactly is your risk tolerance level? In simple words, risk tolerance refers to a realistic understanding of when you will panic or not in terms of investments.robinhood stock trading You see, if you dive into Robinhood without any background information, there is an equal chance that you’ll earn big or lose it all. As a word of advice, if you are serious about earning from trading stocks, options, or cryptocurrencies, it is important that you trade only what you are comfortable losing.


3. Diving without knowledge? You’ll surely drown!

Before getting sucked into trading, remember that every move should be backed up with research from your trading plan.robinhood risks One common mistake for beginners is that they might become so engrossed in buying that they forget to buy and sell at their target prices. Moreover, some do not even know how or when to cut losses, which is a sure-fire way to lose money.

Remember: Without a plan, trading becomes gambling.


4. The UI design might cost you!

Robinhood does allow you to have a margin account, which means that you can trade more than what is in your current account. Since it lent you money, the app charges you with 5% robinhood trading legit While this may sound like a great deal, other users may think that it is free money and will end up maximizing the margin. Take note of the real experience of one trader in the video below.



5. Trading is just not for everyone!

If you are seriously considering engaging in trading, know that with the thrill of catching a trend also comes with great losses if you do not come prepared.A BETTER ALTERNATIVE TO TRADING For instance, Robinhood has made rounds on the internet as media covered the news of a suicide of a 20-year old options trader. If you are someone who easily becomes frustrated or may lose sleep due to losses, then trust me on this…

Steer away from this type of money-making opportunity.


So, is Robinhood Stock Trading a scam?

Let me get this straight; Robinhood is legitimate at all levels. It’s just that the generating income from this type of platform poses grave challenges. 

Unlike other forms of investment, your income in Robinhood is affected by various factors such as the timing, the market itself, the amount of investment, and knowledge on what is traded.


For me, it all boils down to this question: how safe is Robinhood in earning profits?

I’ll let you be the judge of this one. A quick Google search on Robinhood’s news can show you that there are numerous cases (not about its legitimacy) about how it profits from beginners in trading…


Is there a better alternative to trading?

In a nutshell, we can say that your profits from trading depend entirely on technical analysis and market conditions. 

That shows that there is no way for you to have a steady stream of earnings from stock trading. 

With this being said, I’d like to share with you an alternative to trading that is very beginner-friendly and doesn’t require huge upfront costs. 

The alternative business model is called affiliate marketing, and it’s perhaps the best choice for people who want to build a passive income source that will last them years. 

My journey in affiliate marketing is way beyond what a trader experiences in his day to day life. You see, I don’t have to deal with charts, candlestick signs, and screeners, but I sure spend an equal amount of time researching for things I’m passionate about. 

With all honesty, I can say that affiliate marketing is the best choice for:

  1. People who are new at making money online 
  2. Those that want to build a passive income source
  3. Those who are looking for a flexible working schedule
  4. Those who wish to have the freedom to choose what to promote.

Aside from trading, affiliate marketing is one of the BEST ways by which people can make money online legally without losing sleep over miscalculated moves.

It’s one of the most common ways people earn online nowadays, and it’s what has helped many everyday folks to achieve four figures of passive income in their first year of starting. 

Similarly to online trading, you must first make an initial investment in an online training course, and the one I recommend the most is, without a doubt – Wealthy Affiliate.

Wealthy Affiliate is an online platform that seeks to educate complete beginners about affiliate marketing’s ins and outs. It supports all of its members by providing them with training, tools, and resources to go out and absolutely crush it with affiliate marketing. 

At Wealthy Affiliate, you’ll be able to learn all kinds of fun stuff, like how to establish your own website, how to drive traffic to it, and my favorite part, how to make money from commissions of products you’re not even owning. 

I’m a member of Wealthy Affiliate, and my knowledge of building and managing sites is what got you on this page, which is a clear indication that the training inside this platform works.

As I end this article, I would like to thank you for joining me as I shed light on the truth behind the question, “Is Robinhood stock trading a scam?” 

If there’s something else you might want to know about this trading app, please ask your question in the comment box below, and I’ll make sure to answer it as soon as I can. 

As always, wish you the best of luck. 🙂



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