Pattern day trading | Robinhood

Pattern day trading

Pattern day trading rules are defined by FINRA, one of our regulators. 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 stock or ETP within a single trading day
  • You open and close the same options contracts within a single trading day
Keep in mind

Pattern day trading restrictions don’t apply to cash accounts, they only apply to margin accounts and IRA limited margin accounts. This means you can trade stocks, ETPs, and options in a cash account without worrying about your number of day trades. Note, you won’t be able to trade on unsettled funds from stock, ETP, and option sales while in a cash 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. This rule only applies to margin accounts and IRA limited 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 is the sum of your cash, stocks, and options, and doesn’t include crypto positions.

For the purposes of PDT, your portfolio value excludes any crypto positions or 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.

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’re restricted from day trading or not on any given day, check your 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 investing 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 cash 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:

  • Use your one-time courtesy PDT flag removal, if it’s available.
  • Switch to a cash account, since cash accounts aren’t subject to PDT regulation. Check out the investing accounts article to understand the differences between cash accounts and margin accounts.

In addition to allowing day trading, these options will also allow you to resume participation in the Sweep and Stock Lending programs, which are paused when flagged for PDT in a margin account.

Note

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.

PDT policy update FAQ

What’s happening?

Our pattern day trading (PDT) policy changed on September 5, 2023. Per FINRA regulation, PDT flags will remain on your account indefinitely, outside of extraordinary circumstances.

What can I do?
  • Make sure Pattern Day Trade Protection is enabled. These are a series of in-app notifications that let you know when your account is approaching or at risk of a PDT flag. You can check whether Pattern Day Trade Protection is turned On in Account (person) → Menu (3 bars) or SettingsInvestingDay trade settings.
  • Switch to a cash account. A cash account isn’t subject to PDT regulation. This will allow you to continue day trading and regain access to our Stock Lending and Brokerage cash sweep programs.
  • Maintain $25,000 in portfolio value. This won’t prevent a PDT flag, but will enable you to continue day trading.
  • Monitor your day trades. Placing fewer than 4 day trades in any rolling 5 trading day period will help avoid a PDT flag.
Can I use my one-time removal?

If you haven’t already used it, you’ll still be able to use your one-time pattern day trading flag removal. However, if you’ve already used your waiver, you won’t receive another one.

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
  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/or 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. For more details, check out Pattern Day Trade Protection.

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.

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.

Brokerage cash sweep and PDT

If you've been flagged 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 while in a margin account. If you're flagged as a PDT while enrolled in the brokerage sweep program, your cash will be swept back from program banks. Any accrued interest will be paid to your investing 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. Review FINRA Rule 4210(f)(8)(B) for more details on the definition of and requirements applicable to PDT.

Note

You can switch to a cash account to resume earning interest in the stock lending and brokerage cash sweep programs.

Stock Lending and PDT

If you've been flagged as a pattern day trader (PDT), you’re ineligible to participate in Stock Lending while in a margin account, regardless of your portfolio value. Until the PDT flag is removed, the Stock Lending option will be disabled, and any stock that you have loaned will be returned to your account.

We disable Stock Lending because any stock loans don’t count toward the $25,000 minimum.

To switch to a cash account

Follow the steps in Switch accounts to switch to a cash account.

Day trading examples

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

Stock and ETF trade examples

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 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 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’d 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.

Options trade examples

1 buy, 1 sell

You start with zero ABC call contracts, and then:

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

This counts as 1 day trade or a single-leg trade because you opened and closed ABC calls in the same trading day. Check out the Options Strategy Builder for more examples and help.

1 sell, 1 buy

You start with zero ABC put contracts, and then:

  • Sell-to-open 1 ABC Put
  • Buy-to-close 1 ABC Put

This counts as 1 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 1 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 1 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.

Review Basic options strategies and Advanced options strategies for more trade strategy examples, or check out the Options Strategy Builder for more examples and help.

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, review 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 isn't appropriate for all investors. Certain complex options strategies carry additional risk. Robinhood Financial doesn't 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, 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 investing account. When enrolled, interest is earned on uninvested cash swept from your investing 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 aren't stocks and your crypto investments aren't protected by either FDIC or SIPC. Robinhood Securities, LLC and Robinhood Crypto, LLC are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

Robinhood, 85 Willow Road, Menlo Park, CA 94025.© 2024 Robinhood. All rights reserved.