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Robinhood is the first stock trading app that allows zero-fee trades for hundreds of stocks. It's a great place for those who want to have a lot of control over their stocks and avoid having fees eat up their profits. Avid traders will see around $100 to $200 in savings just because of the lack of fees.
If you want to make money, though, you still have to employ a little strategy. Those who are new to trading and are just beginning to invest in the stock market would be wise to learn the most important things to void in Robinhood before they plunk down cash...
First off, don't buy stocks like an idiot.
This isn't just one of the things to avoid on Robinhood; it's advice that every newbie investor needs to hear. Plopping down cash on random stocks is a great way to lose out on money, and the same can be said about selling stocks in fear of losing even more cash.
When checking out stocks to buy, learn a little bit about the performance of the stock. Find out what they do, and why they do it. An app like Stockflare will allow you to get the scoop on what you want to buy—and whether you should consider it.
You also should add funds way in advance.
If you're used to instant bank transfers, we got some bad news for you. One of the things to avoid on Robinhood is forgetting to stock up on funding before you trade. It takes several days for the funds to clear in the app.
Since it can take a while for funds to clear, you need to add in some padding about a week before you want to pull the trigger on a trade. Waiting time aside, Robinhood is still one of the best online brokers for stock trading.
After all, it's not like free trades will happen with Schwab. The waiting time is a small price to pay.
Don't try to do instant trades.
Believe it or not, this is one of the more important things to avoid on Robinhood. This is because Robinhood has lags that cause price fluctuations. So, while you might have wanted to get penny stocks at one price, you often will find yourself paying slightly more or less.
Robinhood really isn't the kind of app you should use for instant trades. If you want to try to capitalize on trading on minor changes of price, you're better off trying a Limit Order or a Stop Limit Order.
A Limit Order will execute at the maximum price you're willing to buy. A Stop Limit Order will execute your trade when it reaches a certain price range.
Losing money? Have a Stop Loss order that sells off your stock once it falls below a certain price.
Actually, your best bet is to go in for the long run.
If you are going to buy a stock, just let it sit there. Selling it the moment it begins to sink in price is a good way to make a fool out of yourself and lose money. Like other tips on here, this goes beyond things to avoid on Robinhood and is just a good tip to keep in mind.
Over the years, most stocks go up in price. There will be moments where there have been serious stock market crashes in our history, but most publicly traded companies were able to recover. Keep calm and you'll do better than expected in the long run.
Don't check your stocks daily.
Counterintuitively, this is one of the most important things to avoid on Robinhood. Seeing your portfolio shrink for day after day will make anyone, even avid veteran stock traders, freak out a little inside. It will skew your trading strategy badly.
Checking Robinhood daily will often only end up making you anxious, which in turn will cause pre-emptive sales and major losses. Don't do this to yourself. Limit your time checking things to once a week and you'll feel way better.
Don't rely on Robinhood for your research.
As much as it pains me to say, one of the more crucial things to avoid on Robinhood is using it exclusively for your research. Robinhood doesn't really give the full details about the stocks it hosts, and while it may now offer five years of history, there's a lot more you can learn before putting your money down.
It's often better to get a more in-depth analysis. WikiWealth and ClosingBell both give good recommendations on stocks, along with a little better information. ClosingBell even has a Robinhood integration that makes it a worthwhile app to consider if you want zero fee trading.
Never invest more money than you can afford to lose.
Here's the thing about stocks: you can lose all the money you put in. This is true about almost any investment you make. One of the worst things to avoid on Robinhood, or with any other broker, is investing way more money than you really can afford living without.
There's no reason to take that hard a risk. Stocks are volatile—and it's not worth having to explain why you don't have rent. Even if you are a winner, Robinhood's withdrawal process takes a bit and that still will put you in jeopardy.
Don't day trade. (No, really, don't!)
Remember when I said that Robinhood isn't really that good for day trading? If you have just a regular account, making multiple trades of a stock in the same day can cause your account to freeze. That's not good, no matter how enthusiastic a trader you may be.
If you have Robinhood Gold, then you should be aware that day trading still isn't a good choice on the platform. Delays will still happen, and that can put you at a loss.
Don't invest in stocks just because someone tells you to; use your own common sense.
Hype is a hell of a drug, especially when it comes to stock trading. One of the biggest reasons for the Great Depression was because a lot of people ended up hyping up stocks, over-inflating stock prices, and speculating on what they could be worth.
All stocks and cryptocurrencies can get over-hyped. Rather than just buy it because someone told you to, research it first. A single article telling you their stock investing strategies for the year isn't enough to know whether it's a good purchase.
Don't forget to have fun.
Of all the things to avoid on Robinhood, this is the most important. Stock trading should be fun. You're making money! It's a thrill! You get to see cool numbers going up and down, and you get to have an impact on the economy.
So, go ahead. Load up on cash. Research your stocks. It's all part of having skin in the world's most lucrative game.