Goodbye Robin Hood


Earlier last year, I wanted to know more about what’s happening with the day trading crowd – meme stock, YOLO, Reddit, etc. – so I opened a Robinhood account.

It was an eye-opening experience to see how trading has become “gamified”. (I have entered less than a dozen orders and executed less than half of them).

Remember, my career started at a trading desk, where we used everything from Instinct to Bloomberg to SOES to Nasdaq Level III. I have traded stocks, options, ETFs, mutual funds and bonds (I know my way around trading programs). In terms of interface and user experience, Robinhood was less like those professional products – it was closer to Candicrush than NQDS.

It was clear to see what was coming; As we have discussed Before As the market began to turn, many people began to find trading easier: “How can we make money Day trading from home? We only buy stocks that are going up; If they don’t go upstairs, we won’t buy them. “

Only if.

Understanding what “luck” is and what “skill” is is challenging. In fact, as Dunning-Kruger has shown, metacognition – the ability to self-evaluate your own skill set – is an individual skill in itself. In that particular case, as your ability improves, so does your metacognition in a certain ability.

The good news is that these types of trading apps have never presented the kind of systemic risk we saw in the 2008-09 GFC; The bad news is that a lot of people have transacted too much and lost some money. Some traded a lot and lost a lot of money, while a few traded everything and lost everything.

Ironclad despite economic rule “There is no such thing as free lunch“People tend to forget.

Although I can’t be the level of experience1 Or the generation that Robinhood is targeting, it is easy to see how addictive it can be. At the desk, you had to learn to recognize when you were trading for profit or for an adrenaline or dopamine rush. It was easy to see how the algorithms behind the phone trading app targeted this same limbic system response. That can be a problem for some people.

I have nothing against Robinhood,2 But those were another compliance report I had to fill out, and it’s easier to maintain a personal account with a RWM keeper (Schwab, Fidelity, or TD) than a third party app.

Another thought comes to mind: when technology people roll into finance, financial people use technology, you end up with a completely different product.



Unilateral Market (September 29, 2021)

Wrong direction of trade (April 15, 2022)

My Worst Business (September 7, 2021)




1. It has become a legend how easy it was to play the Options Trading Approval algo game, but without doing so I honestly filled out the RH Options app. Trading experience: 30 years; Alternative experience: 25 years. Assets: 3 billion. Interestingly, I was not approved for RH options trading.

2. Without missing their seed round in 2014 or 15. When I moved to RH, I called it “I’ve never heard of dumb investment ideas

The post Good-bye Robin Hood first appeared in The Big Picture.

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