What Happens If You Are Marked As A Pattern Day Trader On Robinhood? (2024)

FAQs

What Happens If You Are Marked As A Pattern Day Trader On Robinhood? ›

If your account is flagged for PDT, you're 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.

There is nothing wrong with being a pattern day trader, but it does mean you have to follow day trading rules. The most significant rule that pattern day traders must follow is the $25,000 minimum account balance. Margin accounts that are not flagged as pattern day traders have a minimum account value of $2,000.

Yes, there are two ways to have the restriction removed. You may call 855-525-7634 and request to use your one-time reset request. The removal of the restriction may take 1-2 business days.

PDT Meaning

Once your account is labeled as a pattern day trader then you have to maintain at least $25,000 in equity in your account. The plus side to this is you will have more buying power available. For non day traders you only get 2:1 buying power but as a day trader you will get 4:1 day trading buying power.

When a customer with more than $25,000 is flagged as a PDT, the customer can day trade for unlimited times if he/she has sufficient day-trading buying power(DTBP). Your DTBP is equal to the excess maintenance margin that is available in your account multiplied by two (or by four, brokers can adjust the leverage).

Per FINRA regulation, PDT flags will remain on your account indefinitely, outside of extraordinary circ*mstances. What can I do? Make sure Pattern Day Trade Protection is enabled. These are a series of in-app notifications that let you know when your account is approaching or at risk of a PDT flag.

You'll be considered a “Pattern Day Trader” if you execute 4 or more day trades within 5 trading days, provided that the number of day trades represents more than 6% of your total trades within your margin account for that same 5 trading day period.

As a retail investor, you can't buy and sell the same stock more than four times within a five-business-day period. Anyone who exceeds this violates the pattern day trader rule, which is reserved for individuals who are classified by their brokers are day traders and can be restricted from conducting any trades.

The moment your trading account is flagged as a pattern day trader, your ability to trade is restricted. Unless you bring your account balance to $25,000 you will not be able to trade for 90 days. Some brokers can reset your account but again this is an option you can't use all the time.

How to get PDT flag removed? ›

Why Do I Have to Maintain Minimum Equity of $25,000? Day trading can be extremely risky—both for the day trader and for the brokerage firm that clears the day trader's transactions. Even if you end the day with no open positions, the trades you made while day trading most likely have not yet settled.

Violating pattern day trading regulations can have serious consequences, including penalties imposed by regulatory bodies. Common repercussions for non-compliance may include trading restrictions, fines, or even suspension or expulsion from the securities industry.

The simplest way to avoid being labeled a PDT is to refrain from making more than three day trades within five rolling business days. Additionally, keep the following in mind: Individual options contracts aren't necessarily considered day trades if they're part of a spread or larger order.

To help protect novice investors from large losses, in 2001, the Financial Industry Regulatory Authority, or FINRA, created the pattern day trader, or PDT, rule. Under the PDT rule, any margin account that executes four or more day trades in a five-market-day period is flagged as a pattern day trader.

Account suspension: In some cases, a brokerage firm may suspend your account if you repeatedly violate the PDT Rule or other trading rules. The suspension may last for a certain period of time, or the firm may terminate your account altogether.

Pattern day trading restrictions don't apply to non-margin accounts, they only apply to margin accounts. This means you can trade securities in a non-margin account without worrying about your number of day trades. Note, you won't be able to trade on unsettled funds from security sales while in a non-margin account.

In addition to having an offshore account, day traders can avoid the PDT Rule by trading foreign currency or futures. Neither of these asset classes require a certain level of cash. In fact, you can open an account with many brokers for just a few thousand dollars.

As I mentioned above, your trading is restricted to unlimited day trades unless you have an equity balance of at least $25,000 in your account. For Robinhood Instant or Robinhood Gold accounts, you're limited to no more than three-day trades in a sliding five-day trading window.