One of the smartest ways to store your extra money wisely is to invest it. That way you can multiply it and have a better understanding of the world.
This may sound too complicated for many people, but the truth is that becoming an investor in today’s world is a lot easier than you might think. There are already a lot of different services and applications for stock trading, including for aspiring shareholders. One of the most successful examples of such an application is Robinhood.
Robinhood is an application that specializes in investing. Here you can make all kinds of purchases and transactions, from investing in stocks to buying cryptocurrencies.
This application is very good for beginner investors because it has low or no commissions and it also offers many interesting options for trade. For example, trading outside of business hours.
But when you start to understand how Robinhood works, you might have a lot of questions. One of them is how many trades can you make with Robinhood?
What is Pattern Day Trading
First of all, you need to understand the rules of Pattern Day Trading. They were introduced by FINRA, one of the Robinhood regulators. The application provides its users with tools that can be used to make sure you invest correctly.
You also need to understand what a day trade is. A day trade is when you buy and then sell the same stock or open and close the same option contract(s) within one trading day.
If you make 4 or more day trades within 5 trading days, you are considered a typical trader. This works as long as the number of daily trades is more than 6% of the total number of trades in your margin account.
The normal limit is 3 daily trades within 5 trading days unless you had at least $25,000 of portfolio value in your Instant or Gold account at the end of the previous day. This means that for any period of 5 trading days if you place a fourth day trade you will be marked as a day trader.
You will then need to have a portfolio of over $25,000 at the end of the trading day in order to be allowed to continue day trading the next day.
The value of your portfolio is the sum of your cash + stocks + options. Remember that this does not include your cryptocurrency positions.
During the trading day, the value of the portfolio can fluctuate above $25,000. But only the amount at the end of the trading day will be taken into account.
You can check if you are not allowed to day trade on any given day by going to the Robinhood app and going to Account > Day Trades section. Keep in mind that this value does not include your Gold Buying Power or cryptocurrency – only cash, options, and stocks in your account.
What are the exceptions
It is important to know that Pattern Day Trading restrictions will not apply to cash accounts. It only works on Instant and Gold accounts.
A Robinhood Cash account will allow you to trade without commissions during standard and extended trading sessions.
But keep in mind that you will not have access to Instant Deposits or Instant Cash.
You can switch to a Cash account at any time from an Instant or Gold account.
What happens if you break the Pattern Day Trading rule
If you place a fourth day trade, your account will be marked as pattern day for the next 90 calendar days. This means that you need to have more than $25,000 in your account in order to trade during the next 90 days
If you were day trading as a pattern day trader and at the end of the previous trading day your equity was below $25,000 then you will be issued a day trading violation. You will be restricted from buying stocks or options at Robinhood Financial and cryptocurrency at Robinhood Crypto for the next 90 days.
To remove the restriction you need to close the trading day with more than $25,000 capital. However, if you’ll violate the trading rules again frequently during the day your account can be left for closing only, even if your capital is over $25,000.
How to use the Day Trade Counter
There is a very handy feature in the app. You can see exactly how many daily trades you have done in a five day trading period:
- Click on the account icon in the bottom right corner of the app
- Click on the Investing item
- To do this, scroll down to Day Trades
Here you can see the details of your daily trades and see how much more you can do.
What other restrictions are there
Also, if you want to sign up for the Cash Management program you were already marked as a pattern day trader (PDT), you can still sign up and use your debit card, but you will not be eligible to participate in the deposit sweep program.
If you were flagged during the Cash Management program
You will be disenrolled from the deposit sweep program. All of your money will be returned from the banks in the program. Interest earned will be credited to your account, but no new interest will be earned.
