There's been a huge surge in new traders seeking exposure to the stock market over the last 18 months. Whether you're talking about blue-chip stocks like Apple (AAPL) and Tesla (TSLA) or any of the thousands of penny stocks, Robinhood has become the go-to for day traders. You've also got increased attention on cryptocurrencies, and right now, the platform also offers access to a handful of popular digital currencies like Dogecoin. But is this just window dressing? Is Robinhood really a good platform to use to trade penny stocks, cryptocurrencies, and large caps? While everyone has their own opinion on the matter, there are some positives and negatives to keep in mind.

Pros & Cons To Robinhood

I usually write about small-caps and penny stocks. In light of this, I'll talk about these for a moment. One of the great things about this application is that it's simple. There are few advanced tools to configure, and there aren't many charting options that would cloud the application or slow things down. It's also very straightforward when it comes to placing a trade: Buy or Sell and what type of order you'd like to place (limit, market, etc.). This has all led to the growing interest of the new traders who found stocks to make money during the pandemic. What's more, if you look at the penny stock brokerage growth statistics of 2020, the only other "application" or broker that saw larger growth was that of TDAmeritrade/Schwab for the simple fact that they affected a merger and combined their userbase. 

Needless to say, there is a problem when it comes to trading penny stocks on Robinhood. The application restricts access to certain types of stocks. With very few exceptions, OTC penny stocks are inaccessible to users. The company that owns the Robinhood app has consistently emphasized its active push for protecting clients from risky types of investments. While this may be a catch 22 in light of offering highly speculative things like Dogecoin, the results are the same. If you're trading any of the stocks under $5 on Robinhood, you're going to need to choose from those listed on the NYSE or Nasdaq. 

This might not seem like as big a deal as it sounds. But if you're looking for things like marijuana stocks, for instance, the vast majority have zero exposure to Robinhood traders. The big story of the year has concerned U.S.-based cannabis companies, also known as multi-state operators or "MSOs". The only way for Robinhooders to access the numerous U.S. marijuana stocks is by investing in ETFs like the AdvisorShares Pure US Cannabis ETF (MSOS).

If you've focused on any of the cheaper penny stocks, for instance, you're also out of luck. For instance, if any Nasdaq or NYSE becomes one of the penny stocks under 10 cents, it falls in the danger zone in a big way. The main reason for this is because these exchanges require companies to maintain a minimum bid price of $1. So you can see that the lower the price, the harder it could be to regain that compliance. Sure, they can do a reverse split to reduce the outstanding shares and, in turn, boost the share price. But most if not all Nasdaq and NYSE penny stocks choose to address this much sooner and avoid letting the market slip that low.

Should You Use Robinhood To Buy Stocks?

Other than lack of access to the full market, there are other downsides to using Robinhood to buy stocks. Execution time takes much longer than other self-directed online retail brokers. Also, when it comes to market orders, getting "the best price" is rarely the case compared to platforms like TDAmeritrade, ETrade, or even Interactive Brokers. Nevertheless, the simplistic approach to trading stocks, options, and crypto seem to outweigh the negatives even if they sacrifice price and execution times. 

You've also got to consider the questionable practices that have come to light over the years. Ways the company makes money sells trading flow, and the glitchiness of the application, in general, have come into question. At the end of the day, if you're an active trader, Robinhood may not be the best choice for you. Though the platform is easy to use, the execution time could be a big problem for high-volume traders. On the flip side, if you're more passive, don't necessarily need superfast trade speed, and just want a simple way to buy and sell stocks, options, and cryptocurrencies, then Robinhood may be a viable option among the growing list of retail brokers available to sign up for.