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.
You’ve made a day trade when you buy and sell (or sell and buy) the same security within a single trading day.
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.
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. This rule only applies to margin accounts.
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.
For the purposes of PDT, your portfolio value excludes any available margin. 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.
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 BST, so it'll be 2:30 PM GMT or 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.
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 in a margin account 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 in a margin account.
Because the $25,000 portfolio value requirement is set by FINRA, all brokerages are required to enforce it. For more information, you can learn about day trading rules on FINRA’s website.
To see how many day trades you’ve made in the current 5 trading day period in the app:
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 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. For more details, check out Pattern Day Trade Protection.
When you place an order, it won’t actually count as a day trade unless it executes. You might see an open order that’s been placed but not executed in your Day trade counter. This helps alert you ahead of time that if your order executes, it’ll count as another day trade.
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.
An order to buy 10,000 shares of XYZ may be split into separate orders:
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.
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.
You can switch to a non-margin account to resume earning interest in the brokerage cash sweep program.
Understanding day trading can be complicated. The following are some examples of what is and isn’t a day trade.
You start with zero shares of ABC stock and then:
This counts as 1 day trade because you bought and sold ABC during the same trading day.
You start with 10 shares of ABC stock, and then:
This counts as 1 day trade because you bought and sold ABC during the same trading day.
You start with 10 shares of ABC stock, and then:
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.
You start with zero shares of ABC stock, and then:
This counts as 1 day trade because there is only 1 change in direction between buys and sells.
You start with zero shares of ABC stock, and then:
This activity counts as 2 day trades because there are 2 changes in directions from buys to sells.
Different methods apply for designating a trade as a day trade and what shares are used for cost basis.
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.
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.