Pattern day trading | Robinhood

Pattern day trading

Pattern day trading (PDT) rules are defined by FINRA, a US regulator. These rules apply to all Robinhood customers, including our UK customers. We’ve gone a step further and provided you with tools you can use to make sure you’re investing responsibly.

Defining a day trade

You’ve made a day trade when you buy and sell (or sell and buy) the same security within a single trading day.

Keep in mind

Pattern day trading restrictions don’t apply to non-margin accounts, they only apply to margin accounts. This means you can trade securities in a non-margin account without worrying about your number of day trades. Note, you won’t be able to trade on unsettled funds from security sales while in a non-margin account. Your default account at onboarding is a margin account.

Understanding the rule

Your account will be flagged for pattern day trading if you make 4 or more day trades within 5 trading days, and the number of day trades represents more than 6% of your total trades in that same 5 trading day period.

If your account is flagged for PDT, you’re required to have a portfolio value of at least $25,000 to continue day trading. Your portfolio value may fluctuate above $25,000 at some point during the trading day, but we only take into account the closing balance of the previous trading day.

All trading activity is included in calculating your prior day’s closing equity value. This includes any extended hours trading and transfer activity up until 8 PM ET. However, positions are valued, based on their 4 PM ET closing price.

Keep in mind

Our app will show you the equivalent Greenwich Mean Time (GMT) or British Summer Time (BST) that matches up with the US Eastern times for trading hours. For example, 9:30 AM ET is 5 hours behind GMT and 4 hours behind BST, so will either be 2:30 PM GMT or 1:30 PM BST.

To verify in the app whether you’re restricted from day trading or not on any given day, follow the steps in Day trade counter.

Note

The 5 trading day window may not necessarily align with the calendar week. For example, Wednesday through Tuesday could be a 5 trading day period.

If you place your 4th day trade in the 5 trading day window, your brokerage account will be flagged for pattern day trading. This means you can’t place any day trades until you bring your portfolio value above $25,000 or switch to a non-margin account.

To continue day trading while flagged for PDT, you’ll need to end the trading day with a portfolio value above $25,000. Otherwise, continuing to day trade may lead to a position closing only restriction. This means you can close positions you already own, but can’t open any positions.

If you’re unable to maintain a portfolio value above $25,000, you can:

In addition to allowing day trading, these options will also allow you to resume participation in the Brokerage cash sweep program, which is paused when flagged for PDT.

Day trade counter

To see how many day trades you’ve made in the current 5 trading day period in the app:

  1. Select AccountMenu (3 bars) or Settings (gear)
  2. Select InvestingDay trades

One-time pattern day trading flag removal

If you’re currently flagged as a pattern day trader, you may be eligible for a one-time removal of your pattern day trading flag and associated restrictions. View your options here.

Pattern Day Trade Protection

Pattern Day Trade Protection alerts you when you’re about to place a 4th day trade. This feature will give you the option to proceed with the 4th trade, or cancel it to avoid being marked as a pattern day trader.

Order versus execution

When you place an order, it won’t actually count as a day trade unless it executes.

Multiple executions

Orders usually execute all at once, but occasionally you might see multiple or partial executions. This sometimes happens with large orders, or with orders on low-volume stocks. For regulatory purposes, each execution counts toward your day trade count, so trading low-volume stocks or placing especially large orders may increase your chances of executing a day trade.

Example

An order to buy 10,000 shares of XYZ may be split into separate orders:

  • Buy 1,000 shares
  • Buy 2,000 shares
  • Buy 3,000 shares
  • Buy 1,500 shares
  • Buy 2,500 shares

Placing a sell order before your buy order has been completely filled puts you at risk of executing multiple trades that would pair with each sell order, resulting in multiple day trades.

If you place a sell order before all 10,000 shares are purchased, every sell order (up to 5) that you place on the stock for that day will count as a separate day trade.

Brokerage cash sweep and PDT

You’re signed up for the brokerage cash sweep program by default when you onboard. If you get flagged as a pattern day trader (PDT), you won’t be eligible to earn interest while in a margin account. While flagged as a PDT, your cash will be swept back from program banks. Any accrued interest will be paid to your brokerage account, but you won’t accrue any additional interest.

The reason we pause participation in the brokerage sweep program when you’re flagged as a PDT is because cash at program banks doesn't count toward the $25,000 minimum needed to continue day trading. Swept cash also doesn’t count toward your day trade buying limit.

Note

You can switch to a non-margin account to resume earning interest in the brokerage cash sweep program.

Day trading examples

Understanding day trading can be complicated. The following are some examples of what is and isn’t a day trade.

1 buy, 1 sell

You start with zero shares of ABC stock and then:

  • Buy 1 ABC
  • Sell 1 ABC

This counts as 1 day trade because you bought and sold ABC during the same trading day.

Leading sell

You start with 10 shares of ABC stock, and then:

  • Sell 10 ABC
  • Buy 5 ABC
  • Sell 5 ABC

This counts as 1 day trade because you bought and sold ABC during the same trading day.

Non-leading sell

You start with 10 shares of ABC stock, and then:

  • Buy 1 ABC
  • Sell 10 ABC

Although you already own 10 shares of ABC, you opened a new position in ABC with the initial purchase. This activity counts as 1 day trade.

Multiple buys and sells

You start with zero shares of ABC stock, and then:

  • Buy 1 ABC
  • Buy 2 ABC
  • Buy 7 ABC
  • Sell 1 ABC
  • Sell 5 ABC
  • Sell 4 ABC

This counts as 1 day trade because there is only 1 change in direction between buys and sells.

2 day trades

You start with zero shares of ABC stock, and then:

  • Buy 50 ABC
  • Sell 15 ABC
  • Sell 35 ABC
  • Buy 10 ABC
  • Sell 10 ABC

This activity counts as 2 day trades because there are 2 changes in directions from buys to sells.

Day trade and cost basis are different

Different methods apply for designating a trade as a day trade and what shares are used for cost basis.

  • You start with zero shares of ABC stock, and then:
  • Buy 10 ABC on the 1st day
  • Buy 5 ABC on the 2nd day
  • Sell 10 ABC on the 2nd day

This counts as a day trade because you bought and sold the same stock within a single trading day. However, for the cost basis, you would use the cost of the 10 shares bought on the 1st day to calculate the cost basis for the 10 sold on the 2nd day based on FIFO (first in, first out). For more details about FIFO, review Cost basis.

Disclosures

All investments involve risks, including the loss of principal.

Robinhood U.K. Ltd (Robinhood UK) is a company registered in England and Wales (09908051) and is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the US by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

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All investing involves risk and a loss of principal is possible.

Robinhood U.K. Ltd (Robinhood UK) is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

Robinhood U.K. Ltd is a private limited company registered in England and Wales (09908051).

Robinhood does not provide investment advice. Individual investors should make their own decisions.

Commission-free trading of stocks refers to $0 commissions for Robinhood self-directed individual brokerage accounts that trade U.S. listed securities and ADRs. Keep in mind, other costs such as regulatory fees may apply to your brokerage account. Please see Robinhood UK’s Fee Schedule to learn more.

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© 2024 Robinhood. All rights reserved.
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All investing involves risk and a loss of principal is possible.

Robinhood U.K. Ltd (Robinhood UK) is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

Robinhood U.K. Ltd is a private limited company registered in England and Wales (09908051).

Robinhood does not provide investment advice. Individual investors should make their own decisions.

Commission-free trading of stocks refers to $0 commissions for Robinhood self-directed individual brokerage accounts that trade U.S. listed securities and ADRs. Keep in mind, other costs such as regulatory fees may apply to your brokerage account. Please see Robinhood UK’s Fee Schedule to learn more.

UK Privacy policy

© 2024 Robinhood. All rights reserved.