Understanding the Pattern Day Trader Rule
Before diving into the specifics of selling on Robinhood it’s crucial to grasp the concept of the Pattern Day Trader (PDT) rule. This rule, implemented by the Financial Industry Regulatory Authority (FINRA) restricts the frequency of day trades within a margin account.
What is a Day Trade?
A day trade occurs when you buy and sell the same security within the same trading day. This essentially means you’re opening and closing a position within the same day, without holding the security overnight.
The PDT Rule Explained:
The PDT rule states that if you execute four or more day trades within a five-business-day period, and those day trades account for more than 6% of your total trading activity during that period, your account will be flagged as a pattern day trader.
Consequences of Being Flagged as a PDT:
If your account is flagged as a PDT, you’ll be restricted from making further day trades until you maintain a minimum equity of $25,000 in your margin account. This means you’ll need to deposit additional funds to meet the requirement before resuming day trading activities.
How Often Can You Sell on Robinhood?
Now, let’s address the core question: how often can you sell on Robinhood? The answer depends on whether you have a margin or a cash account.
Selling in a Cash Account:
In a cash account, you’re not subject to the PDT rule. This means you can sell stocks as frequently as you like, as long as you have sufficient settled funds in your account to cover the purchase. However, it’s important to note that if you sell a stock that you haven’t fully paid for, you’ll incur a good faith violation.
Selling in a Margin Account:
If you have a margin account, the PDT rule applies. You can execute up to three day trades within a five-business-day period without being flagged as a PDT. However, if you exceed this limit, your account will be restricted.
Strategies for Selling on Robinhood:
To avoid being flagged as a PDT, consider these strategies:
- Monitor your day trade count: Keep track of your day trades within a five-business-day period and ensure you stay below the threshold.
- Increase your account equity: Maintaining a minimum equity of $25,000 in your margin account exempts you from the PDT rule.
- Use a cash account: If you primarily engage in day trading, consider using a cash account to avoid the PDT restrictions.
- Plan your trades: Before executing a trade, determine whether it’s a day trade or a long-term investment. This helps you manage your day trade count effectively.
Additional Considerations:
- Settlement periods: Remember that trades settle two business days after the trade date. This means you cannot sell a stock you bought on the same day.
- Market conditions: Market volatility can impact your ability to sell stocks at your desired price. Be prepared to adjust your selling strategy based on market conditions.
- Trading fees: Robinhood charges a $0 commission fee for stock trades. However, other fees, such as SEC fees and regulatory fees, may apply.
Understanding the PDT rule and implementing effective selling strategies are crucial for successful day trading on Robinhood. By adhering to these guidelines, you can optimize your trading experience and avoid potential restrictions. Remember to always conduct thorough research and carefully consider your risk tolerance before making any investment decisions.
The term “commission-free trading” pertains to the absence of fees for self-directed, individual cash or margin brokerage accounts operated by Robinhood Financial that trade stocks, ETFs, and options. S. listed securities and certain OTC securities electronically. Remember that your brokerage account may be subject to additional fees, such as wire transfer fees, paper statement fees, Gold subscription fees, and trading (non-commission) fees. Please see Robinhood Financials Fee Schedule to learn more.
Trading options carries a high risk and is not suitable for all clients. Before using any options trading strategies, customers must read and comprehend the Features and Risks of Standardized Options. Options transactions can be quite complicated and carry a risk of losing the entire investment in a short amount of time. There is additional risk associated with certain complex options strategies, such as the possibility of losses exceeding the initial investment amount.
With permission from Mastercard® International Incorporated, Sutton Bank, Member FDIC, issuing the Robinhood Cash Card, a prepaid card. Affiliated companies and fully owned subsidiaries of Robinhood Markets, Inc. are RHF, RHY, RHC, and RHS. RHF, RHY, RHC and RHS are not banks. The securities products that RHF offers are not covered by the FDIC and carry risk, which could result in the loss of principal. Cryptocurrencies kept in RHC accounts are not subject to FINRA regulation and are not protected by the FDIC or SIPC. While funds held in Robinhood Money spending accounts and Robinhood Cash Card accounts may qualify for FDIC pass-through insurance, RHY products are not covered by SIPC (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement)
Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.
Robinhood U. K. Ltd. (Robinhood UK) is subject to Financial Conduct Authority regulation and authorization (FRN: 823590). When it comes to their usage of the Robinhood UK app and website, UK customers are onboarded by Robinhood UK, which also maintains the primary customer relationship with them. For order routing, execution, clearing, settlement, setting up custody services, and margin lending to qualified UK customers with margin accounts, Robinhood UK introduces them to Robinhood Securities, LLC. Robinhood Securities, LLC is regulated in the U. S. by the SEC and FINRA. Robinhood Markets, Inc.’s subsidiaries include Robinhood UK and Robinhood Securities, LLC.
How To Sell Your Stocks on Robinhood – Quick Tutorial
FAQ
How many times can you sell on Robinhood in a day?
Does Robinhood have a sell limit?
How soon can you sell on Robinhood?
Are you allowed to day trade on Robinhood?
How many times can you buy a stock on Robinhood?
You just can’t buy and sell a stock or options contract in a single day more than three times over the course of five business days. This isn’t just a Robinhood. This applies to traders using any brokerage firm. But with day traders on Robinhood, there are exceptions…
Can you sell a stock on Robinhood?
Robinhood is a popular investment app that offers commission-free trading for stocks, ETFs, and cryptocurrencies. Once you’ve bought a stock on Robinhood, you may decide to sell it and cash out your profits. So, here’s how to sell stock on Robinhood and cash out your funds.
How long can you trade a pattern on Robinhood?
If you place your fourth day trade in a five-day window, Robinhood will mark your account for pattern day trading for ninety calendar days. This means you won’t be able to place any day trades for ninety days unless you bring your account equity above $25,000.
Does Robinhood give you a day trade call?
Day trading stocks like these exposes Robinhood to more risk, and so if they feel that risk is too large, they may give you a day trade call. You can increase your day trade limit by depositing more money , but not by selling stock. Robinhood will give you a day trade call if you make a trade that is over your account’s limit.