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Webull Pattern Day Trading (PDT) Rules. Can I Day Trade on Webull?
Pattern day trading rules at Webull. Active trader PDT requirements for
margin and cash accounts above/below $25,000 balance. How many day trades does Webull allow.
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Pattern Day Trading at Webull
The pattern day trading (PDT) rule is a policy of FINRA. It’s not created by Webull, but the broker must enforce it. Thankfully, there are legal methods to get around it.
How Many Day Trades Does Webull Allow
The PDT rule is very clear: if you’re a pattern day trader, you have to keep at least $25,000 in equity in your margin account. Equity can be in the form of cash or securities.
A pattern day trader is defined as someone who:
- Trades equities in a margin account (notice that it says “margin account”)
- Makes at least 4 day trades (of stocks, options, ETF's, or other securities) within a rolling 5-business-day period
- Has day trades totaling more than 6% of an account’s trading activity for the above-mentioned 5-day period
Because the law is pretty specific, it’s fairly easy to avoid the PDT rule. If you end up breaking it, you could see your account frozen for 3 months. You don’t want that to happen, so keep reading.
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Methods to Circumvent the PDT Rule
There are several ways to get around FINRA’s day-trading rule. First and foremost is to place fewer
than 4 day trades within 5 business days. If you stay under this limit, your account won’t be
flagged as a PDT account, which means you wouldn’t be required to bring your equity up to $25k.
If you just want to practice day trading to get your feet wet, no problem. You can do that and not worry about the $25k rule. Just place fewer than 4 trades a week. You could theoretically place lots of day trades in a 1-year period and never be flagged as a pattern day trader.
The next loophole is the “6%” figure in the third bullet point. If your day trades add up to less than 6% of total trading activity in the account, you can’t be classified as a pattern day trader. Obviously, if you’re only day trading, your day trades will be 100% of trading activity. So you would need to do a lot of other trading.
Another method to avoid America’s PDT rule is to swing trade instead of day trade. Swing trading is defined as buying an asset and then selling it in less than 2 weeks, but at least 1 day later. Day trading is buying and selling within the same day.
Instead of using a margin account, you could instead open a cash account. If you do this, you obviously won’t be able to trade on margin, which will be a big disadvantage for many day traders.
You’ll also need to avoid free riding inside a cash account, which is trading with unsettled funds. Stocks settle two days after the trade date; so if you sold something on Monday, you wouldn’t be able to trade with those funds until Wednesday.
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