While day trading is not for the faint of hearts, it still represents a valid way to trade for some people and certain strategies. But if you have been curious about placing a Robinhood day trade, you might have asked yourself how reliable they are.
Trade execution and commission become all the more important with frequent trading. So we took on our detective hat and explored all the ins and outs of day-trading with Robinhood. Keep reading to find out all about it, and if you just want a general intro to the company, you can check out our Robinhood review.
Day trading is not without a certain stigma. The idea that this practice can lead to quick profits leads many to invest large amounts in a short time. Without the necessary knowledge, general losses are exacerbated by day trading. Thus, the Robinhood day trading rule has been put in place to mitigate this issue.
The first Robinhood day trade rule limits traders to 3 day trades within 5 trading days. This is put in place to reduce the risk that certain traders tend to take on, if allowed to engage in intraday trading on a continual basis. Another Robinhood day trade rule only allows investors with a portfolio value of at least $25,000 to partake in this practice more than 3 times within the given window. Again, this acts as a precautionary measure to protect their users.
The Robinhood day trade limitation is put in place to protect customers. As we’ve outlined above, the current restriction allows traders to place 3 or fewer day trades within 5 days. The 5-day window is not necessarily a calendar week. The 5 days might overlap with the weekend. Thus, placing a third day trade on a Wednesday will mean having to wait until the following Tuesday to place another day trade.
Portfolios valued at more than $25,000 are not necessarily subjected to the same Robinhood day trade limit. However, for those portfolios that fluctuate and fall below $25,000, it’s important to adhere to this Robinhood day trading rule. Accounts that place more than 3-day trades within 5 trading days, will be marked for pattern day trading. Accounts marked for pattern day trading will not be able to place a day trade for 90 days. In order to remove this Robinhood day trade limit, the total account equity must exceed $25,000. It is possible to do so by depositing or transferring funds into your Robinhood account.
For those who continue to day trade without increasing their account equity to over $25,000 will face a further Robinhood day trade limit. These traders will be unable to buy stocks and options for a period of 90 days.
As we’ve alluded to, it’s possible to avoid the pattern day trading rule. There are two viable ways to do so. The first is by maintaining an account balance of over $25,000. Keeping it a touch over $25,000 will reduce the chances of your total equity falling below $25,000. This tends to happen as market fluctuations and price movements decrease asset prices. Thus, $25,000 is the bare minimum and you’ll be doing yourself a favor by increasing this fractionally over this mark.
Keep in mind that instant deposits do not contribute towards total equity (for pattern day trading purposes). These deposits will need to be cleared (up to 5 business days) before it counts towards your portfolio value. Ensure that all deposits have cleared before engaging in further day trading activities. The second is by utilizing a Robinhood Cash Account as these are not subjected to day trade calls.
Although there is a Robinhood day trading rule, this doesn’t mean the platform cannot be used for day trading. Following the correct process will allow traders to embark on day trading with relative freedom. Keep in mind the Robinhood day trade limit is there to protect customers who do not have the necessary funds to finance consistent day trading activities.
The Robinhood day trade limit will vary depending on the account in question. Each Robinhood day trade limit will be based on a specific start of day value. Then, your Robinhood day trade limit will change throughout the day. This change is based on the order, volume, and type of day trades you make. It’s important to keep in mind that it is not necessarily the number of trades you make that determines your day trading limit. Ultimately, your daily trading limit will be higher if you hold more cash than stocks, or hold low-volatility stocks as opposed to volatile stocks. You can increase your limit by depositing more funds, but not by selling off stocks.
A day trade call occurs when you exceed your regulatory day trade limit. The Robinhood day trading rule must be adhered to by all traders. Receiving a call means that you’ve not kept within the predetermined guidelines. Thus, your account will be restricted. For a period of 90 days, you will not be able to place day trades. However, you’ll have a window period in which to resolve the respective day trade call before your account is restricted.
Resolving a day trade call is paramount to reinstituting your ability to place day trades. Or at least avoiding this inevitable scenario. In order to resolve a day trade call, it is necessary to deposit the required funds into your account. The amount will be displayed in the day trade call email, the in-app card, or in your account menu. Once these funds have been settled, you’ll be able to withdraw your funds. The standard settlement period is 5 days.
Opening an account and maintaining your account is free with Robinhood. However, there are certain day trading fees which are passed on by third-party organisations.
The current trading activity fee is $0.00019 per share for equity sells and $0.02 per share for options sells. The fee is no more than $5.95. You might incur a higher fee as the fee is based on the execution of your order, which can occur in multiple parts. The SEC also levies a fee of $22.10 per $1,000,000 of principal (sells only). To find out more about the respective accounts and associated fees, take a look at the latest Robinhood trade fees.
Day trading on Robinhood is fairly good. The app provides a decent platform for making day trades while there are enough research and educational tools from which to learn. Keep in mind that Robinhood is geared towards newcomers. Newcomers are not necessarily recommended to jump into day trading from the onset. Therefore, the site is more geared toward long term investing with less focus on the fast-paced world of day trading. The app provides users with automatic notifications prior to reaching day trade limits which is a handy feature. Overall, Robinhood is not the top broker for day trading but continues to expand and incorporate innovative features directed at more experienced traders.
Day trading on Robinhood has a couple of disadvantages. The site is tailored to newcomers but lacks the financial advisory component that other top brokers offer. Added to which, day trading should not be top of the list of investment strategies for newcomers. The site also lacks in-depth trading products which many traders use for day trading purposes. It’s apparent that the trading platform might not be at the level needed for day trading as great analytical tools and research functions are required. However, it’s not that Robinhood does not provide a useful mechanism for day trading activities. We do believe that Robinhood will continue to grow and improve in this department.
There are a number of fantastic online brokers that offer low-cost day trading platforms. One broker that comes to mind is Fidelity. With exceptionally low fees on stocks and ETFs, coupled with a trading platform that is geared towards the active trader, this is a great alternative for day trading. There are a number of other online brokers who also offer decent platforms such as TD Ameritrade. Check out our reviews of the best online brokers to find your preferred day trading platform.
Is Robinhood safe to use when it comes to day trading? Yes, this platform is secure and safe. The fact that there are certain rules and limitations are based on industry-wide regulations. These regulations are put in place to protect traders. Although the Robinhood platform is not our number 1 pick for day trading, it is right up there. They offer all the necessary precautions for newcomers while still catering to experienced day trading professionals.
At TradersBest.com, we hold online brokers with transparent policies in high esteem. Robinhood outlines exactly what the protocols are surrounding day trading and how to go about avoiding any unwanted restrictions. Just as they provide useful guidance on Robinhood taxes, so do they for a number of interesting day trading topics.
Robinhood is a relatively new online broker, providing a range of brokerage services to customers. One option when using the Robinhood platform is to engage in day trading activities. Our coverage of Robinhood day trading outlines the ability of the site to cater to this activity. We assess the limitations of the site and assess exactly what the strengths and weaknesses are when it comes to day trading.
Day trading limits are commonplace in the trading world. Not all of the account types are subjected to a day trade limit. However, both the Instant and Gold accounts have a limit on the number of day trades one can engage in. To find out exactly what these limits entail, read our coverage of the current Robinhood day trading environment.
At TradersBest.com, we aim to bring you a full perspective on how to counter certain limitations while still doing so within regulatory guidelines. It is possible to avoid the Robinhood day trading rule on the Robinhood website. Our coverage will take you through the ins and outs of this scenario and how best to go about adapting your approach. This way, you can remove the limitations surrounding day trading.
Players must be 21 years of age or older or reach the minimum age for gambling in their respective state and located in jurisdictions where online gambling is legal. Please play responsibly. Bet with your head, not over it. If you or someone you know has a gambling problem, and wants help, call or visit: (a) the Council on Compulsive Gambling of New Jersey at 1-800-Gambler or www.800gambler.org; or (b) Gamblers Anonymous at 855-2-CALL-GA or www.gamblersanonymous.org.
Trading financial products carries a high risk to your capital, especially trading leverage products such as CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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