> Their whole business is to encourage folks that should not be day trading to day trade

Trading for most people used to be deliberately obtuse. $7.5 commission per trade is criminal for most people, so is charging $50 a month to get a weekly email with basic technical analysis, but that's literally been the bread and butter of retail investing for decades and no one bats an eye to how deliberately ridiculous it all is.

Robinhood drops all the barriers from buying stocks, gives you a warning before they even let you touch options, and they are the evil here? This is like saying venmo is dumb because it lets people wipe out their checking account quicker than writing a check; don't blame the company for idiotic users. Robinhood doesn't even let you day trade more than 4x in a given week unless you have 25k in your trading account, just like every brokerage.

> Trading for most people used to be deliberately obtuse.

When Robinhood initiates options trading by asking you, "Do you think the stock is going to go up?" on a phone interface, they've decided that trading is now just for morons.

Why wouldn't trading be for morons? Should we also limit loans to people who have a specific minimum IQ or do we live in a free society?

Maybe not based on that metric, but is it really unreasonable to limit loans to people who have demonstrated that they have the ability to understand the terms that they're agreeing to?

Idk if we should, but we do. Generally getting a loan includes this thing called the credit approval process. If one is unable to responsibility manage their personal finances they have a good chance of being limited in their access to loans.

Maybe they'll introduce binary options soon.

Imagine on iOS you randomly gets a pop up "do you think gold spot is gonna be above 1250 in 2 hours?" -> long tap the notification directly place an order

Hahaha, I love this comment because when I'm trying to buy options it always makes me chuckle how they allow these type of people to trade naked options

You can't buy a naked call/put.

Naked, covered, and cash secured are terms used to describe how you are covering your downside when you are selling options.

When you buy an option, your downside is always the cash you spent on the option, so you don't have different types of purchases. When you buy you are just buying an option.

As for Robinhood, they don't allow for selling of naked options, only covered and cash secured.

Interesting, thanks!

People just like to have options, I guess.

The average person is more likely to lose money day trading than gain (especially considering the time sink). It's basically boring slow gambling wrapped in the guise of The American Dream.

The average person shouldn't day trade. I buy stocks and basically hold them for years. I've picked some losers and I've picked some winners... but overall my return over the last ~5 years is 19%.

Buying stock with dividends helps even more, now you get money back to invest into more stock :-D

If you just bought s&p or brk (arguably conservative choices) you'd have earned 60%.

Such is the name of the game :-) I have invested relatively little, I just enjoy playing and seeing if I can "win".

Everything else is in index funds.

And by not day trading you're not gambling? Let's just call it betting. What stance are you promoting that is "not betting"?

Stocks are traded everywhere in the world. What’s this have to do with The American Dream!?

The American Dream is to accumulate wealth, and often involves looking for a way to get rich quick, some people think they can do it by day trading. There's a certain American stereotype of playing stocks to become wealthy.

There are cultures where they don't dream about accumulating wealth?

Less than the extent that Americans do? absolutely. In many ways they're obsessed with it. Look how much the gambling industry makes there.

Macau's gambling revenue dwarfs Las Vegas's. None of the top 10 biggest money making casinos are in the United States.

" Their whole business is to encourage folks that should not be day trading to day trade"

Also using the ridiculously upside down moral convention that they are somehow 'the good guys defeating the system' i.e. 'Robin Hood'.

"We wanted to do something after occupy Wall Street, you know. Something real. So, how about, get all the young people to, you know, put their money into Wall Street" is basically their 'storyboard motivation'. Which the CNN interviewer accepted without a hint of skepticism.

It's amazing how many times I've seen people post losses in excess of $20,000 on r/wallstreetbets.

The people in r/wallstreetbets usually understand that they're making stupid bets. OTOH, r/Robinhood is full of completely irresponsible traders -- trading in illiquid securities, dumping tons of money in penny stocks, triggering PDT restrictions and getting stuck with unwanted positions, not understanding bid/ask/mark (usually blaming RH or the "market maker" boogeyman for changing the price on them), buying OTM weekly options (known informally on wallstreetbets as "FD"s...), complaining about tons of "glitches" that are actually just them losing money through ignorance, and (one that has always confused me) blaming all losses on some mysterious "market maker" boogeyman who kills all of their trades.

If it was 1996, these people would be speculating on Beanie Baby portfolios hedged with Charizard cards.

To be fair, RH does sometimes have problems. They blew up the other morning and screwed over a number of people by closing their accounts for the day while they tried to figure out how their system credited them with options sales at 10-100x actual value. RH has definitely got bugs, and if I were serious about playing the market I'd go with IB or TW, or just about anyone else.

That number of people is quite large. Between FB groups, reddit and Twitter comments it definitely exceeds the hundreds.

I was locked out for 29 hours with expiring strangles that would have had significant upside if closed at the right time, lost everything put into them by the time I could get back in.

Never received communication about the lock out or being allowed back in.

They have no phone support and during that whole period not a single email was responded to.

To imagine this company as a bank is one of the most ridiculous concepts ive heard of.

Given the millennial user base, they probably were.

Eh, they're actually going for both millenials and younger. A lot of their advertising is in YouTube ads and YouTube podcasts, which is definitely aimed at a younger audience than millenials.

It's one of my favorite subreddits for that reason. Though there are definitely some people that do seem to have a very legitimate gambling problem and I feel bad for them and their families.

There's one guy on there who lost nearly a million bucks. And another one who I believe has lost more than that, and hasn't posted a single thing in three months, since he finally made it all the way to bankrupt. Makes you think a little, I wonder if he's still alive.

I did learn that options are super exciting and a great way to lose every last penny. I got lucky and came out ever so slightly ahead on my run through WSB, but I got out of it and now I'm back to normal stocks even with my play money.

Yeah, the younger crowd doesn't trade, not because "the maaaan" is keeping them from it, but because it's a very complicated way of making money, and they typically don't want to learn how to do it right. What this startup is doing is telling the younger crowd that it's the former, while also saying "Look how easy this is!" and deliberately oversimplifying complex systems.

It's not a matter of complexity, it's a matter of power, or rather, information asymmetry.

Buying stocks isn't really investing, it's more akin to gambling like Poker, with all other investors at the table.

Many of those investors have massive computers, R&D firms, brilliant minds, 'inside information', and relationships with those companies and CEO's.

So what 'millenial' is going to trade better than those?

Zero. Or at least in the long run.

The only way to 'beat the man' is to have more knowledge than Wall St. and that is extremely rare.

So what 'Robin Hood' does is sign up fish to feed to sharks.

It might make sense to put a chunk of savings in a broad array of stocks (some in bonds, some in gold, some in cash etc.) - but 'trading' against Wall Street is about as smart as playing Poker against the best in the world thinking you're going to win.

The real appeal from the users I have heard is lack of gatekeeping and minimal tolls which I suppose makes it essentially a knife with just a thin hilt as a handle - technically you can save money using it responsibly but most people just hurt themselves.

I’m still up 12% (although down from 30%) in this bull market. The trick to buy an array of better companies and to not sell/trade them. Every trade you make gives the HFT MIT quants an opportunity to take money out of your pocket! Hold at least 1 year for the substantial tax advantage, 2 years for gains to materialize (Peter Lynch’s Advice), or indefinitely as Warren Buffet has advised.

Also don’t touch or put more than 3% in options or crypto. 80% of traders lose money with options and crypto doesn’t usually generate interest or dividends. Also crypto taxes were absolute difficult nightmare for me last year.

> The trick to buy an array of better companies

Congratulations, you just reinvented the S&P 500.

Lol, I can't figure out if that comment is satire or not.

Which is why buying into funds that track the S&P 500 and holding for a long time is a valid way to go...

HFTs don't make money off of retail investors. Can't front run your trade if it can be filled with 1 order. HFTs pray on institutional investors who need to buy or sell large amounts of stock.

> Their whole business is to encourage folks that should not be day trading to day trade

Less cynically, it’s building a book of investors who have likely never lost money in the stock market.

It doesn't really matter; they're making the spread anyway, whether you make money or lose money.

Or Forex market. With carefuul activity Forex can make an 'easy' 20% per year. Stocks I would assume would give a 7-10%.

Knowing that RH gambles your money, it gives them plenty of profit :)

Well, every broker is incentivized to get its customers to trade as much as possible, ie, “make you change your mind often.” This is why brokers promote real-time news, information, focus on earnings reports, etc.

Even on the institutional side, the business is setup to encourage investors to change their mind as much as possible. More trading equals more soft dollars equals getting a larger budget for research. More trading/using more esoteric products means you’ll get more help from Cap Intro to raise money. It takes a lot of restraint to invest like Buffett.

Yeah. It's awful. They've been advertising on a pop culture podcast I listen to, with the host reading copy about how he buys stocks on Robin Hood. Seems irresponsible, especially for a podcast that isn't remotely related to finance.

> Their whole business is to encourage folks that should not be day trading to day trade

See also E-Trade's "Don't get mad, get E-Trade" commercials[0], which are clearly intended to give people the impression that stock trading will make them Super-Yacht rich.

[0] https://www.youtube.com/playlist?list=PLHVKU2qFM7q2HuTv5RCU0...

From what I understand Robinhood ban people who day trade.

The SEC and FINRA (regulatory agencies) don't allow day trading for accounts with balances less than $25,000. If you exceed 3 (?) day trades in the past 5 days, your account is locked from day trading for 90 days (so if you buy a stock you will be unable to sell it that day). All exchanges enforce this rule, not just Robinhood.

I hope this gets challenged in court at some point. The rules went into effect on September 28, 2001 as a knee-jerk reaction to the dot bomb and 9/11:

http://www.finra.org/investors/day-trading-margin-requiremen...

The real story is that the plebes realized they could make 2% per day by day trading and selling short. I did this with my dad and we were up about $40k before 9/11 wiped out most people's gains (this was back when Apple stock was in the $12-20 range). Edit: my dad never sold short because he felt it was unsupportive of companies, but had he done it to balance each of the buy/sell targets I gave him, he would have been up $80k.

I remember being demoralized that I couldn't trade on margin because I would likely never be able to save $25k with my student loan and credit card debt. But if I read the rules correctly now, I don't even think you can sell short anymore unless you have $25k.

This keeps the real day trading profits back in the hands of the rich and I feel that it could/should be challenged as discrimination. Also it breaks the ZOI rule so doesn't sit right with me..

Day trading is not some magical way to profit. Most people who make money around day trading are selling day trading services. Few make money over the long term day trading, and even fewer (any?) are making 2% every single day (400% over the course of a year with ~200 trading days).

The rules were put in place to protect people from being lured into day trading by day trading service companies. The thought was to prevent people from spending their rent money thinking they were going to get rich day trading. Also, trading with small amounts of money pushes people into penny stocks, which is an even faster way for someone to lose all their money.

BTW, since the money is so easy you could always have traded futures which are exempt from PDT. https://www.tradingsetupsreview.com/futures-trading-best-opt...

A gain of 2% a day over 200 days actually compounds to 5148%, not a mere 400%.

True. I was trying to give some benefit of the doubt, since 2%/day compounded is obviously ridiculous.

Good catch, that could be some selective memory on my part. What I remember most is that it was very easy to make 2% on a good day, and we did that over the course of about 6 months or a year, trading about every other week and pulling the money out to sit idle on weeks that we were too busy to trade. I remember there were several times as many days that gained 5% (trading 2-4 times each day) than days that lost 5%.

One of the charts in etrade said we were up $40k over about a 4 month period and my dad had about $50k in play, trading on margin so working with about $100k. So the real return was more like 80% over 4 months, so I guess 240% for a year although I don't know if I'm doing that math right.

My biggest fear most days was honestly that there wasn't going to be enough volatility for the stock to move, meaning we threw away $7 to $28 on trading fees. I was moving furniture at the time and only made $80 on a good day so that was a lot of money for me then.

No day trader makes 2% a day without putting all their capital at risk. You can pick up nickels in front of steamroller till that one day it runs you over. I day trade for a living and consider an extremely good month making 5% of total capital in my trading account.

If you short high beta tech stocks on margin as you mentioned in your post, you'll get wiped out really fast. Go to Wallstreetbet subreddit and pull up the thread where a guy lost 1.5mm this year, he lost it shorting high beta tech stock that did a swing of 10% in the wrong direction forcing a margin call and a liquidation.

If you wanted to capture the downside of a stock, you can buy puts without a margin account. You should probably really understand the market better before you expose yourself to a larger risk than the money you put in.

"I hope this gets challenged in court at some point. The rules went into effect on September 28, 2001 as a knee-jerk reaction to the dot bomb and 9/11:"

The rules were approved in February 2001, so they can't have been a response to 9/11, kneejerk or not.

> The real story is that the plebes realized they could make 2% per day by day trading and selling short.

Can you please elaborate? I'm curious. Why was the money so "easy"? Simply because there were so many amateur traders?

Intraday trading is much less risky than holding a position overnight. A lot of movement happens in the first and last 30 mins of trading, and over lunch. You can exit unproductive positions quickly, whereas if you couldn't day trade you'd only be able to sit and watch how the cards are falling.

Can't you just set autosell conditions to do the equivalent of the function with less time sensitivity? If you can't handle a $10 drop cut out at a $5 and lock in savings if it rises by $15.

Well 2001 was before trading bots for one thing, so most stocks had a daily heartbeat that was easy to follow. Several days a week the volatility on AAPL was easily +/- 1% each day, so we just bought low and sold high. I averaged 2% per day roughly 4 out of 5 days per week, losing 2-5% on the occasional day I was wrong. Also it was easy to predict when people would sell their stock on Fridays before 3 day weekends for example, so we'd sell Thursday afternoon or whatever.

Also we bought right after the dot bomb happened on 9/29/2000 when most all the tech stocks fell by half or more in one day, so there was a constant upward trend where people wanted to start gambling in stocks again over the next year:

https://money.cnn.com/2000/09/29/markets/techwrap/

You can see the drop here, I can't figure out how to share, but enter something like 9/28/2000 through 9/30/2000 in the date range:

https://finance.yahoo.com/quote/AAPL/chart?p=AAPL

You have to remember that these events aren't random. I personally feel that they're controlled by whoever holds the purse strings, so a handful of extremely wealthy illuminati were getting nervous towards the end of the dot com and housing bubbles and made the call to pull the plug so they could re-buy after everything crashed (see: It's a Wonderful Life).

We're overdue for that with the mobile and web 2.0 bubble. The main difference today is that older folks like me remember the lean times so more startups today have pulled themselves up by their bootstraps and are somewhat immune to these market manipulations vs propped-up brands like pets.com in the 90s. But don't think for a second that crashes (or booms) like these with a 50% move in one day can't happen again.

As long as I'm on my soapbox, I wish that I could dabble in a little machine learning and look for correlations that tend to swing together or oppositely one another. No matter how much the bots tend towards noise, there are still markets that are connected that should be easy to spot. I don't know what else I would try though because I stopped following the market after the housing bubble when people started trading foreign currency and Bitcoin etc. I could have bought $20,000 worth of bitcoin when it was $10 so it's all just monopoly money to me now. I feel that chasing easy money is maybe distracting us from real human progress. But what do I know, I'm just the poor sap stuck in the universe where I never made it big hahah.

"Easy money"? It's called luck and luck is hard to come by.

Indeed these rules are yet another way to gatekeep wealth. They are essentially welfare for the already rich, who can buy their way out of regulation via the fact they already own money.

Who would challenge it? FINRA is a private organization, and I'm sure the SEC or FTC has no interest in trying to get them to change that rule.

If you pattern day trade with less than 25k in your account, yes. You will have trading disabled temporarily, but they won't outright ban you

Everyone does if you have less than 25k in your account and do more than 4 day trades in a 7 day period

It's all about the math. It is true they encourage unsophisticated people to go stock trading. But that's not how they do business.

They find gaps in the financial institutions' way of doing business and fill the space.

Appreciate the comment.

And,

https://www.google.com/amp/s/www.bloomberg.com/amp/news/arti...

That is because they sell their order flow to the market makers. They get a rebate on every trade. I bet that is how they make a majority of their revenue.