Making Day Trades with Robinhood
by Paul Ace Diamond "Huggy" Blow
Can you make day trades with Robinhood? What is a day trade? Read on...
by Paul Ace Diamond "Huggy" Blow
What exactly is a day trade?
A day trade is the purchase and sale of the same security on the same day. Here are some examples of what is, and what isn't, a day trade.
Example 1: You buy ten shares of Apple stock in the morning. Later in the day you sell ten shares of Apple. This counts as ONE day trade.
Example 2: You buy ten shares of Apple stock in the morning, then later sell five shares. Later in the day, you sell five more shares. This counts as ONE day trade.
Example 3: You buy ten shares of Apple stock in the morning, then later sell ten shares. Later in the day, you buy ten more shares of Apple. This counts as ONE day trade.
Example 4: You buy ten shares of Apple stock in the morning, then later sell the ten shares. Later in the day, you buy ten shares of Apple, and then later sell those ten shares. This counts as TWO day trades.
Example 5: You buy ten shares of Apple stock on Monday, then on Tuesday you sell those ten shares. Later on Tuesday you buy another ten shares of Apple. This does NOT count as a day trade because you originally bought the ten shares the day before.
DAY TRADE LIMITS
By law, without a "day trading account" you are limited to making up to three day trades in a five business day period. If you want to make unlimited day trades, you must have at least $25,000 in your trading account. This applies to all stock market brokerage accounts, including Robinhood. If you make a fourth day trade in a five day period, Robinhood will tag you as a "pattern day trader" and your day trading priveliges will be suspended for 90 days. That means you will not be allowed to make any day trades for 90 days unless you deposit enough money into your account ($25,000 minimum) to have a "day trading" account.
ROBINHOOD'S DAY TRADING PROTECTION
Robinhood has a day trading protection option that keeps track of how many day trades you have made. By default, the day trading protection will be turned ON, and once you have made the third day trade in a five day period it will not allow you to make any more day trades. The problem with Robinhood's day trade protection is that once you have three day trades made, you will not be able to place bids to buy AND sell a stock at the same time, and sometimes will not allow you to buy OR sell a stock even if you have not made any trades with that stock on that day. You can turn Robinhood's day trading protection OFF, but then you must be careful to not make the fourth day trade that will get you tagged as a pattern day trader. Personally, I keep the day trading protection OFF, and keep close tabs on how many day trades I have made.
There you have it... all you need to know about making day trades with the Robinhood stock trading app. I personally have been using Robinhood for my stock market investing for over a year now, and have found it to be reliable and it has saved me a lot of money on commissions and fees, because there are none. If you are interested in creating a Robinhood account to invest in the stock market, use this Robinhood referral link to create an account and receive one FREE share of stock.