If you’re interested in trading on the stock market but don’t want to pay broker fees, Robinhood is the best option. This commission-free trading app offers quick trading access for buying and selling, but there are a few rules trading newbies should consider before getting started.
Don’t Buy Stocks in Real-Time.
The number one rule of executing trades on Robinhood should always be to use limit orders. When you buy stocks in real-time, you buy them at market price. Because there can be a small delay between the time your order is executed, you may inadvertently pay too much for the stock. Using limit orders means the order will only execute if the stock reaches that price. To change your order type on Robinhood, tap Buy and then Order Types in the right-hand corner. There you can choose from Limit Order, Stop Limit Order, and Stop Loss. You should familiarize yourself with these order types to take advantage of Robinhood’s commission-free trading. Setting up a limit order removes the funds from availability, but the order will not execute until the stock hits the price you specify.
Have Money in Your Account Ready to Trade.
Seeing a stock you want to invest in without having money available is a common beginner mistake. Attaching your bank account to the app and initiating a funds transfer usually takes a few days. By that time, the golden stock opportunity you saw is well and truly gone. Before you decide to make a trade, you should have funds already available in your Robinhood account. There’s nothing worse than finding good penny stocks to trade only to not have the funds available in the app when you want to make the trade.
The ideal investment strategy involves buying low and selling high, but it can be hard to execute when human emotions come into play. It can be tempting to check the value of the stock every day, but that’s an excellent way to get anxious about your stock. Only day traders and swing traders need to check the everyday performance of the market. If you’re investing with a long-term strategy in mind, checking the market a few times a quarter should be enough for your peace of mind. The market will have ups and downs based on the news cycle, which can impact whole sectors on the market. Have patience with the market and avoid checking it every day to avoid the temptation to sell. Fluctuations in your daily portfolio are unavoidable, and there’s no reason to get worked up over them unless they trend into a long-term pattern.
Do Outside Research.
While the Robinhood app offers a robust way to look at news headlines that might be affecting stock prices, you should never rely on it as your sole method of research. Robinhood’s charts only look at the last one year of history for the company, which isn’t a good look at the full health of a company. Consider using a tool like Yahoo Finance or ClosingBell to get a better idea of a stocks long-term strengths.