Trading on Robinhood

Stock Settlement

Stock settlement is the process of transferring proceeds between a buyer and seller after a trade is executed. The regular-way stock settlement time frame is the trade date plus two trading days (T+2). This means when a trade is executed, the brokerage firm must deliver the stock or cash no later than two trading days after the trade date.

With Robinhood and Robinhood Gold accounts, however, we give you access to instant deposits and instant settlement, allowing you to trade with your funds right away. Cash accounts, however, are still subject to the normal T+2 timeline.

With a cash account, Robinhood requires customers to use settled funds (buying power) to purchase stock. The cash from a sale of stock will be received and credited to buying power on the settlement date.

Ex. You receive $100 from a sale of stock executed on Wednesday. The $100 from the sale will be available in your buying power on Monday.

Please note: Banking and market holidays may delay settlement by one trading day. This means the proceeds from sales executed before a holiday may not be available in buying power after the typical settlement time frame.

 

Buying Power

Buying power represents the total amount of stocks that you may currently buy.

From the Robinhood app home screen, tap the Account icon in the upper left to immediately see your current Portfolio Value and Buying Power listed. For more information, tap on “Account” to go to your entire Account Overview.

In an effort to protect customers from volatile markets, Robinhood treats market buy orders as limit orders collared up to 5% away from the inside market. If you submit an order pre-market or after-hours, the last trade price referenced for the collar will be the previous closing price.  If the security opens outside of the range of the collar, and does not come back within that range, the order will remain open and cancel at the end of the trading day if still unexecuted.Please note that market orders, if filled, receive the NBBO price because our executing brokers are bound by Reg NMS. If your total buying power is within 5% of the total notional value of your trade, you may place a limit order to avoid a collar being applied. Please note that market sell orders are not collared. 

Similarly, if you try to place a buy order for a stock that is within 5% of your total buying power, you may not be able to place the order.

Market order collars may vary depending on prices of instruments, market conditions, and other factors.

 

Not Enough Shares

You may receive a “Not enough shares to sell” message when there is a pending order for the shares you are looking to sell. Please make sure any pending orders for the shares you are looking to sell are cancelled prior to placing an order.

To view your pending orders, tap on the icon in the upper left corner to go to the Account menu. From there, tap on History, where all pending orders will be listed at the top. If you’d like to cancel one, choose the specific pending order and then tap “Cancel Order”.

 

No Buy/Sell Buttons

The buy and sell buttons may not appear if:

  • You have no account balance or a negative account balance. You will only see buy and sell buttons if you have a positive balance in your Robinhood account.
  • The security or stock in question is domiciled in a foreign country. There are certain foreign domiciled companies listed on U.S. exchanges that may incur foreign financial transaction fees. In order to protect users from unexpected fees, we do not allow these securities to be traded at this time.
  • The security or stock in question is an OTC security, option, warrant, or mutual fund. Robinhood does not support these yet, but may in the future. More information can be found here.

If none of these apply to you, please email support@robinhood.com.

 

Partial Executions

Partial executions occur when there are not enough shares to fill an order at the specified price. This occurs most commonly with limit orders placed on low volume securities. Please note, there must be a buyer and seller on both sides of the trade for an order to execute.

Ex. ABC stock is trading at $10. A customer places an order to sell 1,000 shares of ABC stock at $11. ABC meets $11 with 400 shares available at the bid price. The customer’s order receives a partial execution of 400 shares instead of 1,000 shares because there were not enough shares available at their specified price.

 

Cost Basis

Your average cost basis for a stock can be viewed on the stock screen below the chart. The average cost basis is calculated from only buy orders and does not change to reflect sells.

Robinhood uses the “First In, First Out” method. This means that your longest-held shares are recorded as being sold first when you sell a stock you own. The shares themselves are not specifically tracked, but the cost associated with those shares is expensed first.

 

Wash Sales

A wash sale involves the sale of a security at a loss and the purchase of a substantially identical security within 30 calendar days before or after the date of the sale. The Internal Revenue Service (IRS) prohibits a taxpayer from claiming a loss on the sale or trade of a security in a wash sale. You can find your total wash sales for the year in Box 1G on your 1099 document.

 

Reasons for Rejected and Canceled Orders

If you receive a notification alerting you that your order was rejected or canceled, please understand that an order may be rejected or canceled for a number of reasons. Here are a few to keep in mind:

  1. If your order was routed to one of our executing brokers that cannot accept orders for a particular symbol, your open orders may be rejected or canceled. In this case, simply reenter the order, and a broker will make sure it gets routed appropriately. If you continue to experience issues, please reach out to Customer Support.
  2. If your order was placed too aggressively through the bid/ask spread of the security, one of our executing brokers may cancel the order during a risk check. 
  3. If you incorrectly place a stop order that would execute immediately, your stop order may be rejected.

If you have questions about these policies, please email us at Support@Robinhood.com

 

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