What is Trading 212?
Trading 212 is quickly growing as one of the most used brokerage platforms in the UK. They’re a London based platform who’s main aim is to make trading accessible to the masses. They have been around for a while as well, after being founded in 2006.
There is a wide variety of asset classes which you can gain access, including currencies, gold, commodities, Forex, Cryptocurrencies and stocks depending on the account you choose, but for this review, we will be focusing mainly on the Invest & ISA accounts.
Trading 212 is approved by the FCA (Financial Conduct Authority), so they’re all above board in terms of their regulatory requirements.
Similar in comparison to Robinhood, Trading 212 follows what some might call a “freemium” business model. This essentially means that they offer significant basic services without any fees, in the hope that users will enjoy the experience enough to use their paid services.
There are two core ways to use Trading 212, either via their web-based trading platform on your web browser or there is also a mobile application which is available for both iOS and Android, which allows you to trade entirely from your mobile phone.
Trading 212 Account Types
The CFD account will allow you to trade anything you wish, but via contracts for difference (CFDs). It is important to note that I would avoid this type of account unless you are a relatively experienced investor already, and you’re willing to take on some higher risk.
A CFD is essentially a bet on the price movement of an asset, without technically owning the asset yourself. For example, you can make a ‘bet’ on the movement of a stock. This comes with its own set of risks beyond a simple purchase of shares, and Trading 212’s stats show that of their users who use a CFD account on the platform over 76 percent of them lose money.
Trading 212 does try and protect their users to some extent by blocking accounts from going into a negative balance.
There is a minimum deposit of £10 into a CFD account, and there are no fees on withdrawals. However, if there is any currency conversion required, there will be a fee of 0.5%
This is the bread and butter of the Trading 212 platform. The standard invest account option provides offerings of more than 3,000 shares and ETFs. These options can be invested into with as little as £1 in your account balance.
There is access to many listed companies located in the UK, Germany, USA, Netherlands, Switzerland and Spain. There is arguably a much wider pool of choice when comparing Trading 212 to one of their closest competitors, Freetrade. Freetrade only offers shares from the USA and UK.
When trading on this account, there are no commission fees at all. This is what makes Trading 212 incredibly popular with the masses in the UK due to the ability to regularly trading without building up huge brokerage fees.
There is a minimum investment of £1 on this account type, and users are able to trade in GBP, EURO or USD.
The ISA account allows you to potentially earn from tax-free gains with your investments. There are no admin, commission or dividend fees on the ISA account.
Similarly to the Invest account, there is a minimum investment of £1, and again, users can trade in GBP, EURO or USD.
When it comes to withdrawing from any Trading 212 account, they claim that your withdrawal request will be complete within two business days. Withdrawing balances from your account is pretty simple, and can be done via the mobile app, or on the website platform.
Types of Trading 212 Orders
This is the simplest way you can trade. It simply puts an order in to purchase your chosen stock at the best current available price. Usually, unless trading in a highly illiquid position, this will result in a near instant completed order.
There is an element of risk associated with market orders, especially in positions which have quite erratic pricing. This order type guarantees to buy or sell your chosen position, but does not guarantee the price. Therefore, if you’re unlucky with your timing, you could end up buying at a sudden high point, or selling at a sudden low point.
This type of trade allows you to set a ‘stop price’. Once your chosen stock hits that stop, the order is executed at that chosen price, or better.
A stop limit is often used by investors who want to limit their downside. For example, you’re in a situation where you’ve made an unrealised gain on an investment, but you don’t have the time to watch the screen throughout the day constantly. You set a stop limit, so that if your position hits a certain price, then it instantly sells. You would set this at a price where you would be happy to realise your gain on your investment. The weakness here is especially in positions which wildly move up and down. It is possible that a stock could drop suddenly for a short period of time, and then go back up. However, the short drop will have triggered your stop limit.
This is a blend between a stop limit, and a market order. Effectively, you can set a stop price, and when the market matches that stop price, your order will execute on the best possible price available at that time.
The risk here is similar to the market order trade where short term fluctuations in a stock’s price could trigger the stop order, but the executed order ends up not being favourable due to the fluctuations.
A limit order allows you to purchase a security at a certain specified price. This will execute on a trade if the price reaches a specified level, and will remain unfulfilled until that price is met. You can set a maximum or minimum (buy or sell).
For example, let’s say you own a stock which is currently trading at £100 per share. However, you think it could suddenly shoot up to £110 this week, and you want to secure your gains if it does. You could set a limit price of £110 for your sale order to execute at that price.
Freetrade is a good alternative!
Freetrade is another trading platform that has a clean look that’s ideal for the beginner investor. When you sign up and deposit £1 and get a share worth up to £200!
There is a scenario where if there is not enough liquidity in the market at the point of triggering your limit order, it may take several trades in order to fulfil the order. This means if the price is currently hovering around your limit, and then drops (in the scenario given above), it is possible you could only execute on a portion of your order until the price rises to your limit again.
What is a Trading 212 Pie?
A pie is a collection of securities, stocks and ETFs. Essentially, the Trading 212 pie will allow you to split many different investments up to represent a slice of your pie.
For example, you could have a Real Estate ETF represent 20% of your pie, and an S&P500 ETF represent 40% of your pie and so on.
You have an ability to hold up to 100 securities within your pie, which allows you to significantly diversify your investments. You can also create multiple individual pies which focus on different levels of risk.
You are able to “AutoInvest” in your pies by setting a customisable deposit schedule to invest a certain amount of money on a given date schedule into your pie “portfolio”. This can be a great way for passive investors to set up their ideal portfolio, and then just let compound interest take effect.
There are many ways in which you can fund your Trading 212 account. Ever since the launch of Trading 212, they have promised to cover all of the deposit fees charged by providers. Admittedly, the cost they take on board here is embedded into the cost of some of their more premium options, but it is a nice feature none the less.
Funding can be provided by a huge number of sources, including: Credit/Debit cards, Google Pay, Apple Pay and Skrill. These options are completely free until you have deposited a total of £2,000. Once you go over that total, there is a fee of 0.7% applied. Therefore, if you are depositing large amounts, then this is obviously going to result in quite a large fee which will cut into your potential gains.
There is however a way to always deposit funds without having any fees attached. The only way to do this is via a traditional bank transfer. It also somewhat depends on which account type you will be depositing into. An “Invest” or “ISA” account is subject to the fees and conditions stated above, but if you are depositing into a CFD account, then there are no deposit fees.
You can also use Instant Bank Transfers which are powered by TrueLayer. This will allow you to link your bank account to your Trading 212 account in a secure manner, which means you can also deposit funds into your account within minutes. It is worth noting that while you can deposit funds
The mobile application is easy and self-explanatory to use. All the information you require is displayed within the app in a succinct manner, and displayed in an easy to read/understand graphical format.
The app allows you to set price alerts, which is the key benefit here, as it allows you to receive push notifications when a position you’re watching hits a certain price. This means you can get in (or out) of a stock on the fly, without needing to be anywhere near your desk.
Is Trading 212 Safe?
Earlier I briefly touched on the fact that Trading 212 is fully regulated by the FCA, which means that there are certain steps they need to take in order to keep your money safe. For example, all investor money is held in a separate client account. This essentially means that if Trading 212 were to go belly-up, there would still be access to your funds. Your money does not become an asset of the business if liquidated.
Up to £85,000 of your money is protected by the Financial Services Compensation Scheme if Trading 212 were to go bankrupt/insolvent.
In terms of IT security, there were many security measures highlighted on the app and web platform, and any bugs seem to be quickly eradicated in order to ensure that their customers are well protected.
Commission Free? How does Trading 212 Make Money Then?
The key to their ability to make money is not in the commissions, but in the spread between the ‘offer’ price for an investor, and the ‘bid’ price. Essentially, this means that Trading 212 take a portion of the gap between the high price and low price of a stock. This is performed through the CFD business Trading 212 obtains on their platform. Trading 212 has been profitable for the last 15 years, so you can rest assured that their business platform is financially stable, and they’re unlikely to go out of business.
Freetrade is arguably Trading 212’s key competitor. Both offer very similar services in terms of making trading more accessible to the masses. Both are good platforms, and offer the same level of quality in terms of their user-friendly app trading experience. However, Trading 212 goes a little further in terms of their educational videos, and offers a larger choice of shares in a wider set of jurisdictions.
Stake is also an effective competitor to Trading 212, and similar in the sense that it offers commission-free trading. We have written a detailed review of Stake so that you can decide whether it may be a better option than Trading 212 here.
Personal finance and commission-free trading for the masses has become somewhat of a hot topic recently, especially since Robin Hood and the Gamestop trading news hit the mainstream headlines. This has led to an upswing in searches online as to the various options which will allow you easy access to trading and investing. We have created a neat breakdown of the options which you can look to for commission free investing.
Trading 212 Fees/Charges
As stated earlier, they follow a “freemium” style of business, which means that they’re one of the few platforms which do not charge you for your transactions, and they’re quite transparent about the fees applicable with their more premium paid services.
Pros & Cons of Trading 212
- Quick and easy account setup
- User-intuitive charting platform
- Great mobile-based price notifications
- Stocks & ETFs are commission-free
- Fractional Shares
- No FX Fees
- Create your own PIe
- Limited Stock Selection
- Deposit using other bank Bank Transfer can be expensive
Trading 212 is a great option for those who are both experienced and new to trading and investing. However, their practice “paper money” £50,000 portfolio should be utilised if you are completely new to investing. It should always be remembered that you can lose money on the stock market, and you should invest responsibly.
Trading 212 is authorised and regulated by the financial conduct authority (FCA) and is covered by the Financial Services Compensation Scheme (FSCS) up to £85,000.
Looking for another trading platform?
STAKE is another commission-free trading platform that has recently launched in the UK. This platform focuses on purely The US market with over 3000 US stocks and ETFs.