Robinhood Pattern Day Trading (PDT) Rules Explained In 2023

Robinhood is a popular online brokerage platform that has become synonymous with millennial investing.

Robinhood offers commission-free trading, making it an attractive option for retail investors looking to invest with a small portfolio.

However, there are some rules that Robinhood traders need to be aware of, especially those who frequently buy and sell securities.

What Is Pattern Day Trading (PDT)?

The Financial Industry Regulatory Authority (FINRA) defines pattern day trading (PDT) as buying and selling or selling and buying the same security or option within the same trading day.

If you are a Robinhood trader, you will be flagged as a PDT if you make four or more day trades within five trading days.

What Happens When You Get Flagged?

If your account is marked PDT, you are required to have a portfolio value of at least $25,000 to continue day trading.

Your portfolio value is the sum of your cash, stocks, and options, and doesn't include crypto positions.

Your portfolio value may fluctuate above $25,000 during the trading day, but Robinhood only takes into account the closing balance of the previous trading day.

If you are flagged as a PDT and do not have $25,000 at the end of the trading day, Robinhood will issue you an Equity Maintenance call.

You will be restricted from day trading for 90 calendar days, or until you end a trading day with a portfolio value of $25,000.

How To Avoid Getting Flagged

• To avoid being marked as a PDT, Robinhood offers Pattern Day Trade Protection.
• This feature alerts you when you are about to place a fourth day trade.
• This feature will give you the option to proceed with the fourth trade, or cancel it to avoid being marked as a pattern day trader.

It's essential to note that an order won't count as a day trade unless it executes.

If you place an order that hasn't executed, it won't count toward your day trade count.

Additionally, orders that execute multiple or partial executions will count toward your day trade count. Trading low-volume stocks or placing especially large orders may increase your chances of executing a day trade.

Final Thoughts

In conclusion, if you are a Robinhood trader who frequently buys and sells securities, it's essential to understand the PDT rules.

Robinhood also offers a Day trade counter and Pattern Day Trade Protection features that can help you avoid being marked as a pattern day trader.

This article was generated using automation technology, and thoroughly edited and fact-checked by an editor on our editorial staff.