Pattern day trading

Pattern day trading rules were put in place by FINRA, one of our regulators. We’ve gone a step further and provided you with tools you can use to help you invest more responsibly.

Before you begin

Pattern day trading restrictions don’t apply to cash accounts. They only apply to margin accounts, like Robinhood Instant and Robinhood Margin. This means you can trade stocks, ETPs, and options in a cash account without worrying about your number of day trades.

Keep in mind

You can switch to a cash account from margin (including Instant) accounts.

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To switch to a cash account

iOS
  1. Select Account
  2. Select the menu (3 bars)→ Investing
  3. Select Day trade settingsSwitch to cash account
Android
  1. Select Account
  2. Select Settings (gear icon)→ Investing
  3. Select Day trade settingsSwitch to cash account
Web
  1. Select Account
  2. Select SettingsInvesting
  3. Select Account typeSwitch to cash account
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Defining a day trade

You’ve made a day trade when:

  • You buy and sell (or sell and buy) the same stock or ETP within a single trading day
  • You open and close the same options contract(s) within a single trading day
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Understanding the rule

You’ll be considered a pattern day trader 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 within your margin brokerage account for that same 5 trading day period. This rule only applies to accounts with a portfolio value of less than $25,000. Your portfolio value is the sum of your cash, stocks, and options, and doesn’t include cryptocurrency positions.

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 in the app whether you are restricted from day trading or not on any given day:

  1. Select AccountSettings (gear) or menu (3 bars)
  2. Select InvestingDay trades

Additionally, the 5 trading day window doesn’t necessarily align with the calendar week.

Example

Wednesday through Tuesday could be a 5 trading day period. If you place your fourth day trade in the 5 trading day window, your brokerage account will be marked for pattern day trading for 90 calendar days. This means you can’t place any day trades for 90 days unless you bring your portfolio value (excluding any crypto positions) above $25,000. If you're flagged as a pattern day trader and you don't have $25,000 at the end of the trading day, you'll be issued an Equity Maintenance call and be restricted from day trading for 90 calendar days or until you end a trading day with a portfolio value of $25,000.

You can open new positions while in an Equity Maintenance call. But if you make a day trade, your account will be restricted to position closing only. This means you can sell stocks/ETFs or close options you already own, but cannot open any new positions. You can resolve this restriction by: switching to a cash account, bringing your portfolio value (minus crypto) above $25,000, using your one-time pattern day trading restriction waiver (if you haven’t already used it), or waiting for the restriction to expire (i.e. 90 days after the restriction started).

Note

Because the $25,000 portfolio value requirement is set by FINRA, all brokerages are required to enforce it. If you’d like more information, you can learn more about day trading rules on FINRA’s website.

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Order versus execution

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.

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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 share
  • 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.

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Pattern day trading + brokerage cash sweep

If you've already been marked as a pattern day trader (PDT), you can still sign up for the brokerage cash sweep program, but you won't be eligible to earn interest until your PDT flag is removed. If you're marked PDT while enrolled in the brokerage sweep program, you'll be unenrolled from the brokerage sweep program and will have your cash swept back from program banks. Any already-accrued interest will be paid to your brokerage account, but you will not accrue any additional interest until you are unmarked for PDT.

The reason we disable participation in the brokerage 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 brokerage sweep program would result in a number of potential day trade calls for those customers, so the industry standard is to disable these programs for PDTs. See FINRA Rule 4210(f)(8)(B) for more details on the definition of and requirements applicable to PDTs.

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Day trade counter

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

  1. Select AccountSettings (gear) or menu (3 bars)
  2. Select InvestingDay trades made
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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/or associated restrictions. View your options here.

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Examples

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

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One-day trade

One buy, one sell

You start with zero shares of ABC stock and then:

  • Buy 1 ABC
  • Sell 1 ABC

This is as a one-day trade because you bought and sold ABC in 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 is a one-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 a one-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 a one-day trade because there is only one change in direction between buys and sells.

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One-day trade (options examples)

One buy, one sell

You start with 0 ABC call contracts

Buy-to-open 1 ABC Call Sell-to-close 1 ABC Call

This is one day trade because you opened and closed ABC calls in the same trading day.

One sell, one buy

You start with 0 ABC put contracts Sell-to-open 1 ABC Put Buy-to-close 1 ABC Put

This is one day trade because you opened and closed ABC puts in the same trading day.

Multiple buys and sells

You start with zero ABC call contracts, and then:

  • Buy-to-open 1 ABC Call
  • Buy-to-open 3 ABC Call
  • Buy-to-open 2 ABC Call
  • Sell-to-close 6 ABC Call

This counts as a one-day trade.

Purchase stocks and exercise a put option

You start the day with 1 long ABC Put, and then:

  • Buy 100 shares of ABC
  • Exercise the 1 ABC Put, selling 100 shares

This counts as a one-day trade because you opened and closed the ABC stock position the same day.

Call option exercise

You start the day with 1 long ABC Call and zero ABC shares, and then:

  • Exercise the 1 ABC Call, buying 100 shares
  • Sell 100 shares of ABC

This counts as a one-day trade because you opened and closed the ABC stock position on the same day.

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Two-day trade

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

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Disclosures

All investments involve risks, including the loss of principal. Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. For more information please see Robinhood Financial’s Margin Disclosure Statement, Margin Agreement and FINRA Investor Information. These disclosures contain information on Robinhood Financial’s lending policies, interest charges, and the risks associated with margin accounts.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Robinhood Financial does not guarantee favorable investment outcomes and there is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing. To learn more about the risks associated with options, please read the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Supporting documentation for any claims, if applicable, will be furnished upon request. Also, be aware of the risks listed in the Day Trading Risk Disclosure Statement.

The Brokerage Cash Sweep Program is an added feature to your Robinhood Financial LLC brokerage account. When enrolled, interest is earned on uninvested cash swept from your brokerage account to program banks. Program banks pay interest on your swept cash, minus any fees paid to Robinhood. Neither Robinhood Financial LLC nor any of its affiliates are banks.

Securities trading is offered through Robinhood Financial LLC, member SIPC and FINRA. Robinhood Securities, LLC is a registered broker dealer (member SIPC) and provides brokerage clearing services. Crypto trading is offered through Robinhood Crypto, LLC. Robinhood Crypto is not a member of SIPC or FINRA. Crypto are not stocks and your crypto investments are not protected by either FDIC or SIPC. Robinhood Securities, LLC and Robinhood Crypto, LLC are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

Reference No. 2524078
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