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Robinhood Trading App and Potential Red Flag Alert

The Robinhood Trading App is very popular due to the fact that it does not have any fees or commissions associated with it. Because of this, it causes many people to take the logical path of “I’m new, so I’ll fund it with just a small amount and do some learning”. Here’s the tricky part, just because it is “logical” does not mean it is the correct path to be taking. I explain why in this video.

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Transcript:

The Robinhood Trading app, zero fees and commission,sounds like a great thing, right?Ehhh.Now right off the get-go, I want to just kind ofclassify two camps of people.And one camp of people you can probably just shut offthe video, it's not going to pertain to you.The other camp please consider what I'm about to talkabout in regards to Robinhood.So Robinhood in and of itself, they're not malicious,they're not trying to do anything harmful on purpose,however there is a major red flag that comes aboutwith Robinhood and with the no fees and all that.But again, going back to the two camps.One camp of people out there maybe you're saying,"Clay, look, I have a small account, I just want to have"some fun, I'm bored out of my mind and I want to save"a plane ticket from heaven to fly to Las Vegas,"so I just want to sit in my basement in my underwear"and use Robinhood and just gamble the markets."Just have some fun, I'm bored."For you, okay, you're self aware, that's what youwant to do, fair enough.You can probably turn o--You can stop the video, I don't want to waste your time.The other camp of people, "Hey Clay, I have a small"account, but I really do want to become a trader,"I really do want to become consistent,"I want to become good and this and I want to try to"make something bigger out of it."I'm definitely not here to gamble, I'm here to learn,"get better and just develop into a trader."For those people, this is the video for you and thisis why Robinhood is actually quite the red flagand offers, one of their attributes, zero commissionsis a red flag at the same time.And this all came about based off a suggestion thatsomebody had on one of my other YouTube videos.So let me first read that and then I'll break things down.So the comment says, "I think it is great advice,"but to deter him from trading all together was silly."I would have turned him onto Robinhood."I think to put 50 bucks into an account is some"great lessons."While that's going on he could save and learn."Now right from the get-go I'm not trying to beat thisperson or call them stupid because the logic makesperfect, perfect sense.But that is why the market is so tricky in and of itselfbecause there's a lot of instances where what makes senseis actually very, very harmful.And this is one of those things.So this person, "Hey don't tell the person with a very"small account who's new not to trade,"you can at least tell them to get a Robinhood account."Why Robinhood?Well it goes back to those zero fees and because thisperson that they're referring to just doesn't havemuch money.So hey, this person's saying, "Just have them throw"50 bucks in."So we'll just call that a small amount, right?I'm not assigning a numerical value to that becausethat can vary depending on what--That's not how you spell account.I can already see in the comment sections right now,"You moron, you don't know how to spell."So account, there we go.So you have a small account and this person's rationalewas hey, get some great lessons.And how are you gonna get great lessons?Again, you fund the account and then you're going tosave and then learn while this little part of thecurve is all taking place.So save and learn while all that is occurring.And again, you're probably saying and if you aresaying this, "Hey, look," congratulations,you're a very logical thinker.I don't understand the problem.You said they're new, you said there's no fee so theycan do a small amount because commissions aren't gonnaeat away at everything and it's just really small,it gets their feet wet, it lets them start to learn.But what's gonna happen is they're just gonna developall sorts of bad habits.Right off the get go when you don't know what you don't knowthat also includes what should you actually be learning?Clay, duh, how to make money.That's about as broad of a statement as it gets.And we'll focus on that, though, how to make money.So how are you gonna make money with a small account?What sort of procedures are gonna be put into place?What sort of things is this person gonna happen?'Cause I guarantee you one thing, making 50 cents,making a buck 50, making five bucks,that's gonna get boring in a hurry.And if you think, "No Clay, I would gladly sit there"and make 50 cents, 75 cents."Well then you are a rare, rare, rare exception ifyou can say that in your heart of hearts.Yeah sure, maybe a few trades but after a whileyou're gonna be like, "Alright yeah, that's great,"let me start to ramp things up."And ramp things up is where things start to, you know.You're learning so I'm not gonna deny that you won'tlearn by a small account.But it's certainly not gonna be great lessons becausethe lessons that you're gonna start to learn,one of them is just gonna be holding and hoping.I mean, when you have a small account one of the areaswhere you're probably gonna head to and which a lot ofRobinhood people go to is the penny stock market.And penny stocks, sure they can be volatile,but in many cases you've got to just sit there and wait,and wait and wait and you've got to hope.You've got to hold and hope.And holding and hoping is just not a strategy,especially on penny stocks.Could it work out? Yeah, absolutely.Any of these strategies--Or any of these kind of lessons could indeed work out,but that's where you surround yourself with a keyconcept which I'll get to in a second.Another thing, I want to play fast movers.Well why would you want to play a fast mover?Of course because your account is small and fast moverscan, they're moving fast so they can potentially giveyou more gains on a trade.Well that's gonna start to teach you chasing.Now of course you're not looking at this as holdingand hoping and chasing, you're looking at this as,"Hey, I'm trading, I'm learning, I'm using just a small"amount so I can just get my feet wet."Chasing, not a good habit at all.But, again, if you want to ramp things up and startto make more than just minimal amounts, you're gonna haveto play active stocks.But when you're brand new you don't know how toproperly play an active stock.And that's gonna lead to chasing, another big thing.Position sizing.Odds are you're probably, I won't say going 100% ofyour account into a trade, but a significant portion.And from a risk management perspective in and of itself,that's not anything else that you should be doingor building the habit of doing.That is not a lesson that you want to be developing.But subconsciously you are.You're allowing all these routines and these habitsto start to develop and, sure on the surface,the voice in your head you're telling yourself,"I'm just doing all this to learn."I'm saving right now so I can maybe buy some courses"from somebody or I'm just saving until I can get"a bigger account, but right now I'm just learning,"I'm taking it easy."And while the intentions are noble, while the intentions areagain, very logical, they don't make sense in thegrand scheme of things because all these other thingsthat you're gonna be forced to do in order to makea decent amount of money, when you actually try to gowith bigger account sizes you're just gonna get hitin the face, your lunch is gonna get eaten in the snapof a finger.And like I was saying earlier, sure, to be fair,all these things could indeed work.But in the world of trading and if you listen to mypodcast show that I have you know that this hasa great chance of developing fool's gold.Meaning you're confusing luck, randomness, chaoswith skill.And that's the big differentiator, those lines get blurred.And when those lines are blurred it's--I'm not saying that habits can't be broken,that would be a bold fact lie, but it's just sucha headache, it's such a costly thing to try to undobad habits that have been formed when luck and skillstart to bleed together.Which it will without question, there's no doubt aboutit in my mind and if you think I'm making this up,like I said, I have now over 130 episodes of the podcastso literally over 130 hours of me talking with othertraders who opened up, shared about their story,and you can see this right here is a very commontheme that comes up time and time again.And if you're somebody that wants to go about thingsthe right way then you've got to first learn whatyou should be learning.And that comes from systematic education,an educational system with structure to it.Do I sell education? Yes.Would I love for you to buy my training courses?Yeah, absolutely.But if you go and decide, "You know what? I'm not gonna"open up that small account I'm just gonna save"and then put that into some sort of structured learning,"and it's not gonna be with you, Clay,"hey that's fine.I'm happy that you're not gonna fall into this trapand build all these bad habits because that's whatyou're at a risk of and that's the major red flagthat comes with Robinhood is it makes that doorjust way to easy to open up, of bad habits.Because attentions are good, it's all logical,but it's just not gonna work out.And like I said I realize that I'm just some guyon YouTube, I'm just sharing my opinion,but I'll put a link to the podcast down belowand yeah go and just start listening to some ofthese episodes and you'll notice time and time again,we talk about this, you hear people that go downthis path say, "I just wanted to start small,"then before I know it I thought I had everything"figured out so I do bigger share size or I do"bigger amounts of money and then I get absolutely"drop kicked in the face."And it's happened multiple times so there's plentyof data there and if you've been trading or haveany sort of experience with trading you know what I meanabout this stuff you've been there before and you knowthat you don't want to be developing those habitsright from the get-go because, while they can be broken,it's a very time intensive and cost,a labor of love, I'll just put it like that.And labor comes in both time and money when it comesto breaking these habits.So just don't start them from the get-go.If you are out there trading alone currently and maybeare in the market looking for a community to join toassist you in your trading or to just help you getanother set of eyeballs, then I do have a privatetrading community where you can trade alongside meand other experienced traders.So what you see popping up on the screen right nowis both an information link, so if you click on theinner circle one that is going to take you to the pagewhere I explain all the details of what exactly comeswith the community; both the chat room and the newsletter.And then the other image that has popped up is a behindthe scenes tour where you can see exactly what is goingto be contained within the community.I take you through, like I said, a behind the scenes tourof everything and that way you'll know preciselywhat you are getting when you join.So definitely check that stuff out if you are interestedand thinking about wanting to join a communityand let me know if you have any questions.

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