While most people use a self-directed online broker, the new generation of trading apps encourage impulsive, risky trading habits. Many of these apps use a “bait-and-switch” technique to attract novice investors. Known as game-day-trading apps, they rely on users’ desire to gamble and win on a regular basis to keep them hooked. Which stock trading app is the worst?
There are many apps available that allow novice investors to make money with their smartphones, such as Wealthbase. Others are designed specifically for novice investors, and provide educational content during volatile periods. For example, Stash’s founders have published posts explaining what a “short squeeze” is in light of the GameStop frenzy. On their Instagram page, they answer customer questions, and send users pop-up messages when they find volatile stocks.
While Mr. Tenev claims that Robinhood has some of the best technology in the industry, the risks of trading through their app are increased by the number of glitches and software problems. One incident saw Robinhood’s software accidentally reverse the direction of an options trade and allowed users to borrow unlimited money in order to multiply their bets. As a result, both profit and loss were astronomical. If you’re new to investing, consider starting small, and investing in stocks slowly over time.