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’ll be considered a pattern day trader if you execute 4 or more day trades within 5 trading days, provided that the number of day trades represents more than 6% of your total trades within your margin account for that same 5 trading day period.

You’re generally limited to no more than 3 day trades in a 5 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 within any 5 trading day period, once you place your fourth day trade you will be flagged as a pattern day trader and will need to have more than $25,000 of equity (stocks, options, and cash) in your account at the end of trading day to be able to continue day trading the next day. Account equity doesn’t include your Gold Buying Power or cryptocurrency.

Your account equity 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 or cryptocurrency–only the cash, options, and stocks in your account.

In addition, the 5 trading day window doesn’t necessarily align with the calendar week. For example, Wednesday through Tuesday could be a 5 trading day period. If you place your fourth day trade in the 5 day window, your account will be marked for pattern day trading for 90 calendar days. This means you won’t be able to place any day trades for 90 days unless you bring your account equity above $25,000.

Please keep in mind that continuing to day trade with an account equity below the $25,000 requirement, while marked as a pattern day trader, will cause your account to be restricted further: you will be restricted from purchasing anything (stocks or options with Robinhood Financial and cryptocurrency with Robinhood Crypto) for 90 days.

Note

The $25,000 account equity requirement is set by FINRA, one of our regulators, so we are required to enforce it. If you’d like more information, you can learn more about day trading rules on FINRA’s website.

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 Investing
  3. Scroll down to Day Trades

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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:

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.

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.

Commission-free trading refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed 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.

Cash Management is an added feature to your Robinhood Financial LLC brokerage account. The Annual Percentage Yield (APY) paid by program banks might change at any time at the program banks’ discretion. Interest is earned on uninvested cash swept from the brokerage account to the program banks. Neither Robinhood Financial LLC nor any of its affiliates are banks. Securities trading is offered through Robinhood Financial LLC, member SIPC and FINRA. Cryptocurrency trading is offered through Robinhood Crypto, LLC. Robinhood Financial LLC and Robinhood Crypto, LLC are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

Reference No. 20201019-1358528-4181030
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All investments involve risk and loss of capital.

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