Robinhood Day Trading

Robinhood Pattern Day Trading (PDT) Limit. Can I Day Trade on Robinhood App?


Pattern day trading rules at Robinhood. Active trader PDT requirements and limits for margin and cash accounts above/below $25,000 balance. How many day trades does Robinhood allow.


Pattern Day Trading at Robinhood


Do you have a Robinhood account? Do you want to day trade in it? If so, you’ll have to stay within some important guidelines; otherwise, you’ll have to deposit $25,000 in your account.


How Many Day Trades Does Robinhood Allow


FINRA requires every account classified as a pattern day-trading account to hold at least $25,000 in equity (a combination of cash and securities). This is a FINRA policy, not a Robinhood policy. But Robinhood is a member of FINRA, which means it must enforce it.

And just what is a PDT account? There are three characteristics, and every one of them must be met for an account to be considered a PDT account:

1. A margin account.
2. Places at least 4 day trades of stocks, options, ETFs, or other securities in a rolling five-business-day period.
3. The day trades make up at least 6% of the account’s entire trading activity.

Any account that does not meet all three of these stipulations is not a PDT account, which means it doesn’t have to maintain $25,000 in equity.


Open Account



Open Robinhood Account

Robinhood PDT Protection


Robinhood offers a unique service not found at most brokerage firms. You can add PDT Protection to your account, and Robinhood’s software will prevent you from placing a trade that could cause the account to be flagged as a PDT account.


Robinhood Pattern Day Trading


To enable this feature, tap on the lower-right icon in the menu on the mobile app. It’s in the shape of a person. On the next screen, tap on ‘Account Summary’ and you’ll get a list of account issues.

At the very bottom is information on day trading, including the number of day trades your account has made within the last 5 days. There’s also a link for day trade settings. Tap on this.

On the next screen is information on the broker’s PDT Protection program. A toggle switch lets you turn this feature on and off.


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Methods to Circumvent the PDT Rule


If you decide to leave PDT Protection off, you’ll need to deposit $25,000 in your account or take at least one step to avoid PDT classification.

Every brokerage account at Robinhood is opened as a margin account. It is possible to downgrade to a cash account, and doing so would eliminate the $25,000 requirement straight away. As we saw above, only a margin account can be classified as a pattern-day-trading account.

If you do decide to day trade in a cash account, keep in mind that you won’t be able to trade with unsettled funds. In the U.S., stocks settle 2 business days after the trade date.


Open Account



Open Robinhood Account

Better Broker For Traders


For traders that are active, a good option to consider would be Webull. This platform has a number of advantages over Robinhood: virtual trading, better app, and advanced trading platform.

Open Webull Account



Open WeBull Account

Robinhood Day Trading Review


If you want to day trade on Robinhood, it is important to know about the platform’s strengths and weaknesses.

It is also good to know about the specific tools that are available to traders. Robinhood offers some nice features and tools that make day trading quite easy to accomplish. Also available are features that protect day traders should they not meet the official day trader requirements.

Read on to see why Robinhood might be a good day trading platform for your needs.


Robinhood Account Types


Traders at Robinhood have their choice of three different account types: all of which can be used for day trading to one degree or another.

There is the Cash Account, the Instant Account, and the Robinhood Gold Account. Here is a quick summary of how each account type might fit your trading style.

Robinhood Cash Account: The Cash Account is a margin-free account. The funds in the account are the trader’s own. As there is no margin to use, there is no short selling, no instant account deposits (after the first $1000), and no option contract selling. It is also not possible to increase buying power for stocks above what the account capital can support. Cash accounts are not subject to the Pattern Day Trading rule, but traders should be mindful of Good Faith violations while trading in cash accounts.

Robinhood Instant Account: The Robinhood Instant Account is Robinhood’s default account type. It is a margin account with limited capacity. Though traders cannot buy or sell securities on margin using Robinhood Instant, the account allows for instant deposits (hence the name), no settling times for cash accrued from selling securities, and putting option spreads on that involve selling options. Since the Instant account is a margin account, PDT is a consideration for day traders.

Robinhood Gold Account: The Robinhood Gold Account is a paid-for account ($5/month). It is similar in many ways to Robinhood Instant in that it is a margin account that provides some added benefits to day traders. Robinhood Gold provides some added features, however. Traders have access to ‘Margin Investing’ which allows them to buy and sell securities on borrowed funds. Also included is better charting, Level II data, market insights, and higher instant deposit limits. As with the Robinhood Instant Account, PDT is a consideration.


Robinhood PDT


Open Account



Open Robinhood Account

Account Minimums


When it comes to day trading, there are a few account minimums to keep in mind. At Robinhood, none of the account types require that there be any money in them. It is possible to ‘day trade’ in any of the accounts with as little as a dollar. Of course, that wouldn’t do much good, but it is possible.

Other account minimums to consider relate to regulations that control day trading activities. Robinhood strictly follows these rules so it is good to know about them.

In short, there is a Pattern Day Trading rule that restricts traders from making more than four round-trip trades in a rolling five-day period. And, there is a Good Faith Violation. The former affects the margin accounts and the latter affects the cash account.

For the margin accounts, the only way to avoid being subject to the PDT rule, is to keep an account balance over $25,000.


Robinhood Buying After Hours


What Does Robinhood Consider a Day Trade?


If you are going to day trade on Robinhood, it is also good to know what constitutes a day trade. It can be a bit complicated at times depending on how positions are opened and closed.

In its most basic form, a day trade is the buying and selling (or selling and buying) of a security. The trader takes a position and then reverses it. Getting into and out of trades can get more complex that that, though.

Large orders with multiple fills, adding to positions, and legging into an advanced position can all be considered single directional as they are opened and closed, as long as all of the buys (or sells) take place before any opposing orders are placed. If any of the buys and sells (directions) are out of order, there will be more than one day trades triggered.

When daytrading at Robinhood, traders have the benefit of a day trade counter tool, as well as reminders before trades are initiated. They are nice features to be sure, and they go a long way to prevent accidental PDT violations.


Day trading on Robinhood


Breaking the Rules


For traders who break the rules, the same 90-day account restriction is enacted as you would see at every other broker. The account is restricted from opening positions during that period, unless the value of the account is brought up to the $25,000 threshold.

Robinhood will, sometimes, offer forgiveness for a first offense. However, they do so at their own discretion.


Features


As far as how the broker is at supporting day trading, there are many attractive features to note. The platform(s) are simple to use and are designed in a way that reduces the feeling of decision fatigue. For a day trader, that can be a good thing in the right circumstances.

When it comes to buying and selling securities, that simplicity is quite apparent. Prices are pegged to market prices unless manually changed to limit orders. This factor can be a bit of a double-edged sword for day traders, though. While the simplicity can make getting in and out of trades very easy, it also takes away some of the tighter control that more experienced traders require.

Extended hours trading is another nice feature on offer at Robinhood. The broker allows traders to access markets from 9am to 6pm EST (regular market hours run from 9:30am to 4pm). While it is certainly nice that Robinhood allows traders to access markets before the public open, the extended hours session is shorter than many other brokers (link to Robinhood pre/post market article).

The trading platforms available could be seen as positives for some day traders, although serious traders would probably be left wanting some important features. On the positive side, there is a mobile application that is easy to use and is considered by many to be one of Robinhood’s most attractive features. The web-based platform is similar, basically emulating the features of the mobile approach. While fast, and easy to use, however, it is missing some important features that are commonly used amongst day traders.

The lack of comprehensive screeners and heatmaps adds to the feeling that more is needed, as does proper hotkey support, time and sales, and volume metrics.


Fees and Commissions


One area Robinhood really shines is the fee schedule that they have. The broker has a zero-commission policy for stocks, options, and ETFs. For market data, Level 2, and ‘advanced’ charting access, and up to $1,000 in margin, the Gold Account is only $5 per month, which is very low. For margin over the $1,000 mark, a 4.25% rate is applied.

Unfortunately, these tools are absent on the Robinhood trading platforms. While it may not be much of an issue for the many of the more casual day traders at Robinhood, most professional day traders would need a little more.


Robinhood Day Trading Final Thoughts


All in all, casual day traders with accounts large enough to meet the $25K PDT rule, can find a lot to love in the simple, mobile-friendly platform that Robinhood supplies. It is easy to search for positions entries (complex options strategies notwithstanding), and getting out is the same. Whether traders are looking to day trade ETFs, ADRs, stocks, or options, there are certainly some good opportunities to be found. On the other hand, day traders who need a more well-rounded set of tools would probably benefit from looking elsewhere.

Updated on 3/23/2022.

About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.