HOOD Stock Swings Like Its Retail Traders

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There are hundreds and thousands of online brokerage companies out there, but very few cut above the rest. Robinhood Markets Inc is one of them. If you want to take some confident steps in your financial journey, Robinhood stocks are the way to go.

Robinhood – The background story

Stanford graduates Vlad Tenev and Baiju Bhatt, who carry ample experience in trading technology firms and investment banks software, founded Robinhood in 2013. The California-based fintech online brokerage company is an early adopter of zero-commission trades and comes with a stock trading and investing app that targets younger retail investors.

Robinhood allows you to become one of the first public investors in upcoming IPOs. There is no need for any special status requirements or minimum account balances. One can invest any amount and trade in real-time and decide how much they want to invest with IPO Access. They can request shares in new companies before their stock begins trading on public exchanges. 

 Robinhood stock allows them to customize their portfolio by investing with different companies to help reduce risk and trade real-time during market hours. The popular stock and cryptocurrency trading app are free to download and compatible with Android and iPhone devices.

The commission-free online brokerage finds other ways to generate revenue and is one of its primary sources of revenue payment for order flow (PFOF). PFOF is the money received to direct the customers’ trades to specific firms that match buyers and sellers of stocks.  Thus, Robinhood makes money based on the difference between the buying and selling price of the stock. PFOF and cryptocurrency trades helped generate more than 80% of Robinhood’s revenues. Robinhood earned transaction-based revenues from interest and other sources, such as subscriptions on premium gold membership

The FINRA-approved broker has executed more than $30 billion in trades ever since the company’s inception. Public database Crunchbase places the net worth of Robinhood to be $40 billion. The company is selling upwards of 57.9 million and expects to raise roughly $2 billion from the IPO.

Although Robinhood is not available in Canada, there is an excellent possibility that it might be available in the future. Currently, only permanent residents of the United States can sign up for a Robinhood account. Thus, even if Robinhood in Canada is a myth for now, but the online brokerage company can expand elsewhere than just the USA.

The considerable movements in stock prices

There are clear and definite equations that drive the stock market. However, a few aspects cause those vast movements in stock prices and move them up and down. Fundamental factors that control the stock prices are based on the earnings and profitability of a company and technical factors relating to the price history in the market. The chart patterns, market sentiment, and behavioral factors of traders and investors are other factors. Increased uncertainty and disparity between supply and demand make the market move in a specific direction, which may be desirable or undesirable for the investors.

Robinhood has been in the news due to its popularity with traders as it offers various forms of finance, equity, cryptocurrency, cash management accounts, and options trading, including ‘buy now, pay later’ cards. Its financial products target wider demographics who find them appealing as they allow the investors to drive faster revenue growth and build a diverse investment portfolio.

Robinhood offers equity, cryptocurrency, cash management accounts, and options trading. The number of clients has risen by 151%, and the funded accounts have crossed 22 million. The Robinhood stocks and clients are expected to grow and become more powerful. Today, HOOD is a “top traded stock” on Fidelity and lures many investors, including significant retail.Robinhood went public recently under the ticker HOOD, and Robinhood stock was priced at $38 per share. This is the lower end of the offering range, and its value has been up to $46.80 per share. The long-term investors see immense potential in Robinhood, and Bulls love it for its potential for massive growth.

The financial system

 Robinhood strongly believes that the financial system should be built for everyone so that just about anyone can start investing at their own pace and terms. The recent crises due to the pandemic have seen an immense rise in retail investors’ participation. These newcomers are piling in and without studying business fundamentals or considering the long-term plans. 

Retail investors with their bullish gumption have cultivated cash into U.S. stocks, making the markets peak. A growing number of individual traders are placing many popular speculative bets on electric-vehicle stocks and green energy; the markets are doubling but in an arguably risky way. These are newbie investors are piling into the market and buying virtually every dip and snap up an average of $6.6 billion in equities each week. However, it would be wrong to assume that all of that money in retail trades is because of dumb retail investors, as some of them do their homework and look for opportunities.

Unfortunately, we should be ready to witness a dramatic shift in attitudes and behaviors of the investors and the market sentiment. The stock market boom is fast turning into an investment bubble that is likely to burst soon, and we are getting close to that point. As an investor, you should know that markets peak when there is nobody left to buy, and the financial system is inching closer to that point. The rule is to sell when everyone is greedy and buy when everyone is fearful. What will cause the asset prices like real estate and stocks to soar higher are the lower interest rates by the Fed and for a longer time. Right now, most investors, especially those buying for the first time, are excited.

Retail investors who are new to the game must learn to hold things for a long time. Robinhood should be priced right and stay at the same price for a couple of months. As an individual investor, one must study the pros and cons of Robinhood’s IPO and move ahead with great caution. Follow a strategic approach to maximize your investment income while minimizing the taxes and develop a goal-driven plan to withstand any bubble burst.