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Pattern Day Trading

Pattern Day Trading

Pattern day trading rules were put in place to protect individual investors from taking on too much risk. We’ve gone a step further and provided you with tools you can use to make sure you’re investing responsibly.

Before you begin
  • Pattern Day Trading restrictions don’t apply to users with Cash accounts, only Instant and Gold users.

  • A Robinhood Cash account allows you to place commission-free trades during the standard and extended-hours trading sessions. You won’t have access to Instant Deposits or Instant Settlement. You can downgrade to a Cash account from an Instant or Gold account at any time.*

Defining a Day Trade

When you buy and then sell the same stock or options contract on the same trading day, you’ve made a day trade.

Understanding the Rule

You’re limited to no more than three day trades in a five trading day period, unless you have at least $25,000 of equity in your Instant or Gold account at the end of the previous day. This sounds tricky, but it just means that if you want to day trade today, you had to have an account value of more than $25,000 at the end of yesterday.

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. To verify whether you are restricted from day trading or not on any given day, you can visit the Account ---> Day Trades section of your app. Keep in mind this value doesn’t include your Gold Buying Power–only the cash and stocks in your account.

The five-trading-day window doesn’t necessarily align with the calendar week. For example, Wednesday through Tuesday could be a five-trading-day period. If you place your fourth day trade in the five-day window, your account will be marked for pattern day trading for ninety calendar days. This means you won’t be able to place any day trades for ninety days unless you bring your account equity above $25,000.

Note

Your instant deposits won’t count towards meeting the $25,000 minimum. For example, if you’ve initiated a bank transfer of $1,000 that will arrive in your Robinhood account in five days, your buying power will immediately increase by $1,000, but the actual funds that count towards your overall equity (for pattern day trading purposes) won’t change until the funds are settled in five days’ time.

Pattern Day Trading + Cash Management

If you've already been marked as a pattern day trader (PDT) before signing up for Cash Management, you can still sign up and use the debit card, but you will not be eligible for the deposit sweep program. If you're marked PDT while enrolled in Cash Management, you'll be unenrolled from the deposit sweep program and will have your cash swept back from program banks. Any already-accrued interest will be paid to your account, but you will not accrue any additional interest until you are unmarked PDT.

The reason we disable participation in the deposit sweep program when you're marked PDT is that cash at program banks doesn't count toward the $25,000 minimum needed to continue day trading. Swept cash also does not count toward your day trade buying limit. Enabling pattern day traders to participate in the deposit sweep program would result in a number of potential day trade calls for those customers, so the industry standard is to disable deposit sweep programs for PDTs. See FINRA Rule 4210(f)(8)(B) for more details on the definition of and requirements applicable to PDTs.

Day Trade Counter

You can see how many day trades you’ve made in the current five-trading-day period:

  1. Tap the account icon in the bottom right corner of your app
  2. Tap Account Summary
  3. Scroll down to Day Trades

Account_Gold__1_.png

Examples

Understanding day trading can be really complicated, so here are some examples of what is and what isn’t a day trade:

One Day Trade

Example

One Buy, One Sell

You start with 0 shares of ABC stock.

Buy 1 ABC

Sell 1 ABC

This is one day trade because you bought and sold ABC in the same trading day.  

Day Trade: (Buy 1 ABC, Sell 1 ABC).

Example

Leading Sell

You start with 10 shares of ABC stock.

Sell 10 ABC

Buy 5 ABC

Sell 5 ABC

This is one day trade.

Since your first transaction for ABC was selling ABC that you already owned from a previous day, it doesn’t count toward your day trades.

Day Trade: (Buy 5 ABC, Sell 5 ABC).

Example

Non-Leading Sell

You start with 10 shares of ABC stock.

Buy 1 ABC

Sell 10 ABC

This is one day trade. Though you already own 10 shares of ABC, you opened a new position in ABC with the initial purchase.

Day Trade: (Buy 1 ABC, Sell 10 ABC).

Example

Multiple Buys & Sells

You start with 0 shares of ABC stock.

Buy 1 ABC

Buy 2 ABC

Buy 7 ABC

Sell 1 ABC

Sell 5 ABC

Sell 4 ABC

This is one day trade because there is only one change in direction between buys and sells. 

Day Trade: (Buy 1 ABC, Buy 2 ABC, Buy 7 ABC, Sell 1 ABC)

Two Day Trades

Example

2x Buy And Sell

You start with 0 shares of ABC stock.

Buy 50 ABC

Sell 15 ABC

Sell 35 ABC

Buy 10 ABC

Sell 10 ABC

This is two day trades because there are two changes in directions from buys to sells.

Day Trade 1: (Buy 50 ABC, Sell 15 ABC, Sell 35 ABC).

Day Trade 2: (Buy 10 ABC, Sell 10 ABC).

Order versus Execution

When you place an order, it won’t actually count as a day trade unless it executes. However, you’ll notice that an open order that you’ve placed but hasn’t been executed will appear as a day trade in your Day Trade Counter. We designed this feature to let you know that if your order executes, you’ll have made another day trade.

Multiple Executions

Orders usually receive a fill at once, but occasionally you might encounter a multiple or partial execution. This sometimes happens with large orders, or with orders on low-volume stocks. For regulatory purposes, each execution counts towards 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 five) that you place on this stock on this day would count as a separate day trade.

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