Can You Day Trade on Robinhood?

  • January 7, 2020

As you look for a good day trading broker, you may be asking "can you day trade on Robinhood?" The answer is yes. But there are some risks and important things you should know before you start, or make any mistakes you will regret. Hang around and we'll explain why below. 

Can You Day Trade on Robinhood

Can You Day Trade on Robinhood?

  • Yes, you can day trade on Robinhood just like you would with any other broker. You will still have PDT restrictions if you don't have at least $25,000 in your account. Also, Robinhood offers zero commissions when trading. There are some helpful tips you should know though...

So even though you can, it has it's challenges and disadvantages. Let's start at the beginning of what day trading is all about. If you're familiar will all the basics, scroll deeper to the million dollar question and we'll cut to the chase.

Did you know RH charges zero commission for US stock, options, and cryptocurrency trading? You'd be hard pressed to find that anywhere else. For the first time trader with limited funds, that’s a big deal because commissions can quickly eat up your gains. It's easier to grow a small account with a (truly) free commission broker.

Nonetheless, the pressing question is: can you day trade on Robinhood? Or better yet, should you day trade on it? 

1. What Is Day Trading?

Day trading is a trading style that's quite attractive to people; especially new traders. You get in and out of a trade on the same day. 

It can be within seconds, minutes or hours. But it has to be within the same stock market trading day. Otherwise it becomes a swing trade, or an investment.

When the markets are in turmoil, sometimes day trading is your best option; especially if you don't trade options.

Those quick moves can be easier to find than long term setups. However, don't force trades just because. Only take the play that's there. If there isn't one, don't trade. 

Now having the best brokerage firms will help you out with day trading effectively.

2. What Exactly Is Robinhood?

Founded in 2013, Robinhood is a discount US broker-dealer app that is best known for being pioneers with offering $0 stock, ETF, options, and cryptocurrency trades to clients in the US and Australia.

The brokerage, with it’s easy to use the website and mobile trading app, appeals to the do-it-yourself investor. 

Robinhood is geared mainly towards millennial investors who want a smartphone-based trading platform without any bells and whistles.

It has been a smartphone-first brokerage, with Android and iPhone apps as the primary methods to log into your account and place trades. 

Our stock trading service is a big fan of the Robinhood platform. In fact, it's a platform we use. Especially while on the go.

Can You Make Money Day Trading on Robinhood? (Review)

  • Yes, you can make money day trading or using any trading style with Robinhood but it still requires you to know how to trade first. Robinhood isn't any different than other brokers. Having your trading skill set is what makes you money not the broker itself. 

When you sign up with Robinhood, you have a choice between three different accounts: Cash, Standard and Gold. One main difference that sets the accounts apart is their day trading limitations.

With Robinhood Standard and Robinhood Gold accounts, you can do only three-day trades per week. If you want to trade more than that, you need to have at least $25,000 on your account. Otherwise, your account's blocked for 90 days. 

As long as you have a cash account with $25,000, you can day trade. A Robinhood Cash account allows you to place commission-free trades during both the regular and after-hours trading sessions.

You won't have access to Instant Deposits or Instant Settlement. PDT restrictions don't apply to users with Cash accounts, only Instant and Gold users.

You can use our stock alerts to trade with Robinhood. We have options trades or just trade regular shares of the stock.

1. Flagged as a Day Trader on Robinhood

When you buy and then sell the same stock or options contract on the same trading day, you’ve made a day trade. Like I mentioned above, unless you have an equity balance of at least $25,000 in your account, your trading's restricted for making unlimited day trades.

For Robinhood Instant or Robinhood Gold accounts, you’re limited to no more than three day trades in a sliding five trading day window. If this scenario applies to you, you fall under the Pattern Day Trading Rule. 

Exceeding the three day trade limit will restrict your account from placing further day trades for 90 days. However, if you can't be successful placing three trades a week, having more can and will be detrimental. 

There's a misconception that being limited to three day trades a week is a bad thing. It's not. Especially if you're new. It helps keep you in check and you can grow your account to $25,000 instead of blowing it up. However, if you are over 25k in your account and you would like to remove the PDT protection, you can "disable pattern day trade protection" in the mobile app.

Here are the steps:

  • Tap the Account icon at the bottom right corner of the screen
  • Tap on Account Summary
  • Scroll down and tap > Day Trade Settings
  • Toggle Pattern Day Trade Protection on or off (only accessible if you are above 25k)

Make sure to take our free online trading courses. We teach you not only options and swing trading but how to day trade as well. So, can you day trade on Robinhood? Keep reading and we'll show you how!

2. Understanding the PDT Rule: Can You Day Trade on Robinhood?

So you know you can only make three-day trades in a five trading day period unless you have at least $25,000 of equity in your Instant or Gold account at the end of the previous day.

I know this sounds tricky, but it just means that to day trade today, you need to have had more than $25,000 in your account at the end of the day yesterday.

Not surprisingly, the value of your portfolio may fluctuate above $25,000 at any point during the trading day. But what's important is your closing balance of the previous trading day.

Robinhood makes it easy to verify whether you are restricted from day trading or not by simply visiting the Account---> Day Trades section of your app.

Keep in mind this value doesn't include your Gold Buying Power–only the cash and stocks in your account.

However, the five-trading-day window doesn't necessarily line up with the calendar week. For example, Wednesday through Tuesday could be a five-trading-day period.

If you place your fourth day trade in the five-day window, your account's marked for pattern day trading for ninety calendar days. 

In short, this means you can't place any day trades for ninety days unless you bring your account above $25,000. Make sure to have proper stock market training so you don't blow up your trading account. Don't worry, Robinhood will  remind you as you make day trades. A window will pop up and tell you "You just made your second day trade" for example.

3. Will Your Instant Deposits Count Towards the $25,000 Minimum?

Unfortunately no. If you want to day trade on Robinhood, your instant deposits won’t count towards meeting the $25,000 minimum. For example, let’s say you transferred $1,000 into your Robinhood account.

Even though your buying power immediately increases by $1,000, the actual funds that count towards your overall equity won’t change until the funds settle. Typically this takes around five days.

Read more on how to get started in stocks if you're new and looking to learn. Trading is exciting when properly trained!

Can You Day Trade on Robinhood With the App? (Review)

  1. Buying and selling stocks on Robinhood up is as simple as following these 8 steps:
  2. Load the Robinhood App on your phone.
  3. Search for your favorite stock, ETF or cryptocurrency.
  4. Tap the "Trade" button.
  5. The next page will give you the option to buy or sell. 
  6. Tap the "Buy" button.
  7. Select your Order Type from the upper right order and the number of shares you want to buy.
  8. Confirm your order.
  9. Swipe up to submit the order.
Can You Day Trade on Robinhood

1. Million Dollar Question 

Now for the million-dollar question: can you day trade on Robinhood? Day trading on the go and being an inexperienced trader can be a recipe for disaster.

And this is one of the dangers the RobinHood App posses. The fills are not always the fastest.  Furthermore, Robinhood lacks a full-service trading platform, not to mention hotkeys. Because of this, you won’t have access to in-depth charting options and the ability to rapidly execute trades.

Both of which are necessary for the active day trader. For these reasons, I recommend that you do not try to day trade on Robinhood alone.

Pair it with a good charting service like trendspider, and focus on stocks or options that are high volume, liquidity, high open interest, tight spreads, and a great pattern setup.

Avoid low float stocks that are highly volatile. You'll be extra disappointed with the fills with low float stocks with high volume. 

On the other hand, Robinhood is suitable for people with less than $5k mostly and then also those who a long term buy and hold investors with any portfolio balance. Cash account traders will be well served here because can day trade options.

While it is not powerful enough to be your only platform, it’s a great way to get your feet wet investing or swing trading. However, this is my opinion. 

There are people who use it to day trade. As a result, if you're going to do so, make sure you have a trading plan. And a plan that you stick too. Don't let greed or fear rule your trades.

That can be made exponentially worse; especially without access to rapid trade executions. Check out our trading room to see us trading during market hours.

2. Can you short on Robinhood? 

One important distinction to make about Robinhood is that you cannot short sell. If you're looking to short stocks, Robinhood is not the broker. This may be there way of protecting their users from costly mistakes, as shorting is one of the more riskier methods of making money. I recommend these brokerage firms for shorting.

3. Closing Thoughts - Robinhood is Legit

One of the main advantages Robinhood brings to the user is the ease at which it allows you to trade. Learning how to day trade on Robinhood is possible, and should be approached with care. Sadly, just learning how to use RH does not help you pick what to buy, a significant problem for inexperienced traders. 

Day trading in general is not for the faint of heart. Because trades are free, the temptation to dive into the world of day trading is real. Be cautious, but keep a positive mindset. 

Not only is this risky, but you’re also guaranteed to fail without the proper tools and education. That is something we at Bullish Bears advise against; luckily, we provide a plethora of free resources to the new trader. 

If you’re starting your trading journey, Bullish Bears can help you sort out which stocks you might want to pay attention to and teach you how to trad them. 

From 24/7 live chatroom availability to coaching and courses, we will guide you every step of the way. Click here to get started learning and happy trading!

In March 2020 Robinhood went completely down. You couldn't see your statement, account, anything. Even the main website is down. Because of this, if you are swing trading or an active trader, you may be REALLY upset. With this in mind, NEVER risk too much in one trade, that is how you blow up your trading account. Follow the one percent rule to protect your account.

You should ALWAYS have a second broker if you are using Robinhood for trading. Do not hold options that could destroy your account if you can't log into it. NEVER put all your eggs in one basket. We mainly use TD Ameritade, but you can check out all your trading companies options.

We hope this answered your questions on Robinhood day trading. Remember guys, patience equals profits! 

Robinhood down

 

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