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 the trading activity in your account results in a “Pattern Day Trader” designation, you must close the business day with a portfolio value (minus the value of any cryptocurrencies) of at least $25,000 in order to maintain day trading privileges for the following trading day.

What happens if I'm flagged as a patter day trader? Once your account triggers the PDT rules, your broker can issue you a margin call if you hold less than the minimum PDT equity requirement. You have, at most, five business days to deposit funds or eligible securities or raise your account to meet the call.

If your account is flagged for PDT, you're required to have a portfolio value of at least $25,000 to continue day trading.

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.

If you are marked as a Pattern Day Trader, and you do not maintain the minimum $25,000 requirement, you will not be able to continue day trading without further restrictions being imposed on your 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.

Getting flagged isn't necessarily bad; it just puts the account under a little more scrutiny. Once your account is flagged as a pattern day trading account, you're required to maintain a minimum of $25,000 of equity in that account in order to day trade securities.

An account will be restricted for 90 calendar days upon being flagged as a Pattern Day Trader (PDT) account, during which no new positions can be purchased.

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.

How do you beat the pattern day trader rule? ›

Buy and swing trade overnight. Since the PDT rule only applies to day trades, you buy and sell a stock within the same day, there's a time loophole that works in your benefit. When you buy a stock overnight and sell the next morning, that does not count as a day trade.

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).

PDT rule consequences

In addition to the $25,000 limitation, traders under the PDT rule are subject to increased regulations and may face account freezes or other penalties for violating trading rules. Those rules were placed to protect the investors from risk associated with high-frequency trading.

If Robinhood flags you as a PDT, typically, your account will be frozen for 90 days. That means you won't be able to execute any trades for roughly three months. You can remove the 90-day freeze penalty if you deposit at least $25,000 in your account.

Open a CASH-ONLY Account

Consider using a cash-only account for day trading. This avoids the PDT rule but requires careful management of funds due to the settlement period.

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.

The Equity Maintenance Call ends when either you bring the account equity above $25,000, or the PDT flag is removed from the account. A pattern day trading flag can only be removed one time from your account. If the account is later reflagged as PDT, the flag will remain on the account.

Open a CASH-ONLY Account

Consider using a cash-only account for day trading. This avoids the PDT rule but requires careful management of funds due to the settlement period.

There are many practical things one can do to help curb a trading addiction such as deleting, blocking or removing devices, apps and websites that were being used to trade. One may also choose to have their funds monitored by a trusted loved one, or moved to a loved one's bank account in the early stages of recovery.