This is a good read, but the most important bit is this: Robinhood is able to offer commission free trading because they essentially skim money off of every trade you make. This is called frontrunning. It's complicated, but essentially they (via third party market makers) will execute your trades at a little above (or below) the best price and then pocket the difference.

This is a crime, and they've been caught and fined in the past, but how else are they going to make money?

Since many people here are excited about the Gamestop fiasco (everyone is making money now, but even more people will be badly hurt when this is all over) I thought it would be good to emphasize this.

To reiterate ROBINHOOD STEALS FROM THE POOR AND GIVES TO THE RICH

The wealthy hedge fund investors that Re getting pwned right now are getting multibillion dollar bailouts, that's not going to happen to unlucky retail investors when this is all over.

  • disco [any]
    hexagon
    ·
    4 years ago

    Here, this is another (possibly better) article on the same subject: https://www.tradersmagazine.com/am/the-hidden-costs-of-robinhood/