How to Sell Your Stock on Robinhood: A Trader’s Deep Dive

Selling stock on Robinhood is a surprisingly straightforward process, designed with the platform’s user-friendly interface in mind. Simply locate the stock you want to sell within your portfolio, tap the “Trade” button, select “Sell,” input the number of shares or dollar amount you wish to sell, review the order details, and then swipe up to submit the order. However, understanding the nuances of order types, market conditions, and potential tax implications can significantly impact your trading outcome. Let’s delve deeper into how to master the art of selling stock on Robinhood.

The Step-by-Step Guide to Selling Stock on Robinhood

Mastering the mechanics of selling stock on Robinhood is crucial, but understanding the “why” and “when” is equally important. Here’s a detailed walkthrough:

1. Locate the Stock: Open the Robinhood app and navigate to your portfolio. Scroll through your holdings or use the search bar to find the specific stock you wish to sell.

2. Access the Trade Menu: Tap on the stock to access its details page. You’ll see a chart, news, and information about the company. At the bottom of the screen, you’ll find the “Trade” button. Tap it.

3. Select “Sell”: A menu will appear. Choose “Sell“. This signifies your intention to liquidate some or all of your position.

4. Choose Your Order Type: This is where things get interesting. Robinhood offers various order types, the most common being:

   • Market Order: This executes your order immediately at the best available price. It prioritizes speed over price, making it suitable for highly liquid stocks where price fluctuations are minimal. Be aware that you might not get the exact price you see on the screen due to rapid market movements.
   • Limit Order: This allows you to set a minimum price at which you’re willing to sell. Your order will only execute if the market price reaches or exceeds your specified limit. This gives you more control over the selling price but might result in your order not being filled if the market never reaches your target.
   • Stop Loss Order: This triggers a market order when the stock price reaches a specified stop price. It’s designed to limit potential losses. Once the stop price is reached, the order executes as a market order, selling the stock at the best available price at that moment.
   • Stop Limit Order: This combines aspects of both stop and limit orders. It uses a stop price to trigger a limit order. When the stock hits your stop price, a limit order is placed at your specified limit price. This offers more price control but also increases the risk of the order not being filled.

5. Enter the Quantity: Specify the number of shares you want to sell. You can also choose to sell a specific dollar amount of the stock. Robinhood will calculate the approximate number of shares based on the current market price.

6. Review Your Order: Double-check all the details before submitting. This includes the stock symbol, order type, quantity, and any price limits you’ve set. A mistake here could be costly.

7. Swipe Up to Submit: If everything looks correct, swipe up from the bottom of the screen to submit your order. Your order will then be sent to the market for execution.

8. Confirmation and Monitoring: After submitting, you’ll receive a confirmation message. You can monitor the status of your order in the “History” section of your Robinhood app. You can cancel the order if it hasn’t been filled yet.

Understanding Order Execution and Settlement

Once your order is executed, the process isn’t quite over. It’s crucial to understand how settlement works.

• Order Execution: The speed of execution depends on the order type and market conditions. Market orders typically execute almost instantly. Limit and stop orders might take longer, or may not execute at all, depending on price movements.
• Settlement Period: It generally takes two business days (T+2) for a stock sale to settle. This means the cash proceeds from your sale won’t be available for withdrawal until two business days after the transaction. You can use these funds to purchase other securities on Robinhood during this settlement period, but you won’t be able to transfer the cash out of your account.

Tax Implications of Selling Stock

Selling stock, even on Robinhood, is a taxable event. Understanding the tax implications is crucial for responsible investing.

• Capital Gains Tax: When you sell stock for a profit, you’re subject to capital gains tax. The tax rate depends on how long you held the stock.
  • Short-Term Capital Gains: If you held the stock for one year or less, the profit is taxed at your ordinary income tax rate.
  • Long-Term Capital Gains: If you held the stock for more than one year, the profit is taxed at a lower long-term capital gains rate, which varies depending on your income level.
• Capital Losses: If you sell stock for a loss, you can use that loss to offset capital gains. If your capital losses exceed your capital gains, you can deduct up to $3,000 of those losses from your ordinary income each year. Any remaining losses can be carried forward to future years.
• Tax Reporting: Robinhood will provide you with a Form 1099-B at the end of the year, which summarizes your trading activity and helps you calculate your capital gains and losses. It’s essential to keep accurate records of your transactions throughout the year. Consult with a tax professional for personalized advice.

Frequently Asked Questions (FAQs)

1. What are the fees associated with selling stock on Robinhood?

Robinhood has revolutionized the industry by offering commission-free trading. This means you typically won’t pay any fees to buy or sell stocks, ETFs, or options on the platform. However, there might be minimal regulatory fees charged by organizations like the SEC and FINRA. These are usually very small.

2. Can I sell fractional shares on Robinhood?

Yes, Robinhood allows you to sell fractional shares of stocks. This is a significant advantage, especially for expensive stocks where you might not own a full share. You can sell a specific dollar amount or a fraction of a share.

3. What happens if I try to sell more shares than I own?

Robinhood will prevent you from selling more shares than you own. The platform will display an error message indicating that you don’t have enough shares to fulfill the order.

4. How do I cancel a sell order on Robinhood?

To cancel a sell order, navigate to the “History” section of the Robinhood app. Locate the pending sell order and tap on it. If the order hasn’t been executed yet, you’ll see an option to “Cancel Order“. Tap on that, and confirm your cancellation.

5. What is the difference between selling at market price and using a limit order?

A market order executes immediately at the best available price, prioritizing speed. A limit order allows you to specify a minimum price at which you’re willing to sell, prioritizing price control.

6. How long does it take for the funds from a stock sale to become available?

Funds from a stock sale typically settle in two business days (T+2). You can use these funds to buy other securities during this settlement period, but you can’t withdraw the cash until the settlement is complete.

7. Can I set up automatic selling rules on Robinhood?

Currently, Robinhood doesn’t offer built-in automatic selling rules beyond stop-loss orders. You’ll need to manually place sell orders based on your investment strategy.

8. What are the risks of using market orders to sell stock?

The primary risk of using market orders is price slippage. This occurs when the price changes between the time you submit the order and the time it’s executed, potentially resulting in a less favorable selling price than you anticipated. This is more likely to occur with volatile stocks or during periods of high market activity.

9. How does Robinhood handle stock splits when I want to sell?

If a stock you own splits, Robinhood automatically adjusts your share count to reflect the split. When you go to sell, you’ll see the updated number of shares in your account.

10. What is a wash sale, and how does it affect my taxes when selling stock on Robinhood?

A wash sale occurs when you sell a security at a loss and then repurchase the same or a “substantially identical” security within 30 days before or after the sale. The IRS disallows you from claiming the loss in this situation. Robinhood usually provides alerts to help you avoid wash sales.

11. How do I transfer my stocks from Robinhood to another brokerage before selling?

To transfer your stocks, you’ll typically initiate an Automated Customer Account Transfer Service (ACATS) transfer through your new brokerage. They will handle the transfer process with Robinhood. Be aware that Robinhood charges a fee for outgoing ACATS transfers.

12. Can I sell stocks on Robinhood in a Roth IRA?

Yes, you can sell stocks within your Robinhood Roth IRA. The tax implications are different than selling in a taxable brokerage account. Gains within a Roth IRA are tax-free upon withdrawal in retirement, provided you meet the eligibility requirements.

By understanding these nuances and following these steps, you can confidently navigate the process of selling stocks on Robinhood and make informed decisions that align with your investment goals. Remember to always do your research and consult with a financial advisor if needed.