Pattern Day Trading at Webull
Being a new or a seasoned trader, everyone needs to know what the PDT rule is and how it can
affect their trading. The PDT rule was put in place by the Financial Industry Regulatory
Authority (FINRA) and makes sure that all brokers regulate the rule to stay in compliance with
them. The PDT rule was created in 2001 and was designed to protect investors, specifically new
ones, from over-trading, unless they have at least $25,000 in their trading account, which can
be made up of cash and or securities.
While it is debatable if this rule does actually protect investors, the rule states:
The rules adopt the term "pattern day trader," which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period.
Simply put, one can make three-day trades in a 5-business day period. If he/she does the 4th trade during that 5-day period, their account can be frozen for 90 days! It is worth noting again that this rule is enforced by all brokers that are regulated by FINRA.
How To Avoid Pattern Day Trading?
That is what the PDT rule is, but how can you avoid it?
1) The most obvious way is to have more than $25,000 (cash and or securities) in your
account. However, that is not possible for everyone so here is an outline of a few other ways
one can avoid the PDT rule, and how Webull can help:
2) Limit day trades. Remember, if you buy a stock today and sell it tomorrow, that is
NOT a day trade. Therefore, you should use day trades almost as a safety net (e.g., when a trade
goes against you, get out early and burn a day trade).
3) Use a cash account rather than a margin account. There is a drawback here and that is
stocks/securities take two days to settle (when funds clear after a sell) so if you want to use
those funds prior to, that is where the margin comes in, which then opens you up to the PDT rule.
4) Have multiple brokers! This is a good tip for many reasons, and maybe there will be an
article written about it, but having multiple brokers (let’s say two) will allow you six trades
in five days rather than just three. The reason being is because the PDT rule is monitored per
broker, not per individual.
One of the many positives of Webull is when it comes to the PDT rule, they state: “Webull offers
a One-Time reset for your PDT violation that can only be used once every 90 days.” This
essentially gives you another safety net!
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Webull Day Trading Pros
So, who is Webull and should one use it for day trading?
Webull launched in 2017, and joined the “commission's free” push that is now widely accepted by
all major brokers. Yes, within just the last couple of years, most brokers were charging
anywhere from $4.99 to $9.99 per trade and now almost all offer $0 trade fees! This has caused
a huge rush (volatility) to the stock market. Thank you, Webull and others!
So what are some of the Pros and Cons of day trading at Webull?
- No commissions on stock, ETFs, crypto, or option trades!
- No account maintenance fees.
- No platform fees.
- Their charting software is very good!
- Very robust mobile app and their desktop platform is just as strong.
- Margin rates are lower than at most other
brokers.
- Webull offers paper trading, so one can practice their skills before risking their money.
- No account minimums! Only have $100 to start trading? No problem!
- Multi-platform accessibility
- More extended trading hours than most brokers; 4 AM until 8 PM Eastern Standard Time.
- Free real-time quotes! Create a free account and gain access to watchlists, news, etc.!
- Webull gives access to a “community” where you can talk with other investors and even pick if
you think a certain stock will go up or down the next day to earn points.
- Webull is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
- More and more access to the increasingly popular cryptocurrency! There is a caveat to this that will be touched on in the “cons” section below.
Webull offers free stock when certain actions are completed, such as:
- Sign-up and get one or two free stocks (depending on the promotion) as well as access to a 3-month subscription to Level 2 (allows one to see the bids and asks for each stock)
- Fund your account - Webull offers more stocks the larger amount the account is funded.
- Refer a friend(s) and they deposit at least $100
- Transfer funds from another broker
- Almost monthly it seems Webull offers additional ways to earn even more free stocks. Stay up to date on this by signing up for their emails and or logging into the app.
- All the stocks offered for free are randomly selected and range from $3 to $1,600!
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Webull Day Trading Cons
That was a pretty long list of “pros” but there are some “cons” as well.
- Support. Webull does not offer a “live chat” nor phone support at this time, only email. While they have always replied to every email, it can take a day, and when trading stocks, this can seem like an eternity!
- No over-the-counter (OTC), stocks under $1, or market caps below $10 Million, trading. This is
the main reason why more traders do not use Webull. So, what are OTC (often called “penny stocks”)
stocks? OTC are stocks that are not traded on a formal exchange such as NASDAQ or the NYSE. This
does leave them open to more manipulation, so be careful, but most other brokers allow access to OTC stock trading and Webull should too!
- No Bonds or Mutual Funds trading either. This a separate bullet-point only because most do not trade these through online discount brokerages anyway.
- Because Webull does not allow trading of OTC, Bonds, or Mutual Funds, that means they “only” allow trading of about 5,000 stocks and ETFs (out of about 16,000). This is still way more than anyone will ever be able to monitor on a daily basis.
- While it was bragged about their app above, it can get a little overwhelming, especially when you navigate off the main section. This is also where “support” replies, so it will take some time to learn all aspects of the app. There are some great videos on this though.
- Cryptocurrency. As mentioned above, Webull does offer cryptocurrency trading, however, when using Webull for cryptocurrency trading, there is no physical ownership of the crypto, only virtual transactions are taking place. Therefore, if he/she is wanting to own and trade crypto, stored in a “wallet”, Webull is not the best platform for this.
Webull Day Trading Recap
There are the “pros” and “cons” of day trading on Webull! Overall, Webull is highly recommended as a trading platform as they have been consistent with the updates and new features continue to be added. It’s only a matter of time until their support offers real-time communication, and they begin offering OTC trading in some fashion.
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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.
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