![]() ![]() Robinhood isn’t the first company to make stock market speculation easier Now that trader can keep placing bets no matter how high the shares climb. A trader with $1,500 in capital wouldn’t be able to wager on Google shares. Instead you can buy a tiny sliver of the stock, making it much more affordable for new investors to get started.Īgain, let’s think it through: Before fractional trading, high stock prices placed something of a speed bump on trading. What this means for regular people is that you don’t need to buy an entire share of Google, which costs about $1,850. ![]() He also thinks the advent of “fractional trading” has been underestimated. He says one of the keys to the bonanza is so simple it’s often overlooked-the proliferation of more than 2.5 billion smartphones around the globe. Robert Cortright, the CEO of DriveWealth, whose company provides brokerage for digital wallets like Square’s Cash App and Revolut, told Quartz last summer that the rise in retail trading has been building up for the better part of a decade. That same trader, assuming they were buying and selling stocks that didn’t fall in value, could theoretically use that $500 to trade indefinitely on an app like TD Ameritrade or Robinhood.Īnd there’s more to it than that. Think about this way: In the old days, a $20-per-trade commission would eat through $500 capital after 25 trades. Trading ramped up this summer as brokerages fees raced to zero. (If you want to know more about payment order flow, you can read about how the retail trading boom is shaking up the US stock market, or why cutting brokerage fees to zero doesn’t make it free, as well as about the hidden costs of SoFi and Robinhood and how Ponzi mastermind Bernie Madoff enabled the US retail trading boom.) Robinhood and the retail trading boom Instead of charging fees to execute trades, one of the main ways Robinhood and others make money is by selling those transactions to large trading outfits. The best-known shift is the move to commission-free trading. This time around, a few things have come together to make stock trading easier and more accessible than ever.
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