You’ve already made 3 day trades in the past 5 trading days, and a stock in your watchlist starts to go crazy! You barely have $10,000 in your portfolio, let alone the $25,000 Robinhood day trading balance limit. You also know that if you enter into a position, you won’t be able to sell until the next day, so what can you do?
Well, in this scenario you really can’t do much but let this opportunity go. You don’t want to enter a position and have it tank by the end of the day, and potentially wipe out half your portfolio, but I got a few tips and tricks a Robinhood user can do to actually be able to day trade on the platform, and not be flagged as a PDT (pattern day trader). The best part, you don’t have to have $25,000 in your account!
It’s statistically proven that the stock market is usually most volatile during the opening hours of the market, between 9:00am-11:30am New York Eastern Time. By lunch time, things usually cool off until 3pm-4pm, which is when some would call power hour– when some stocks would make some gains right before the closing bell.
So if you think about it, a good strategy would be to research and study stocks from market open to noon, and wait til the storm calms and then buy and hold overnight, and sell at market open the next day when the market is most volatile.
Of course, this presents a moderate to high level of risk depending on which stocks you’re looking at, some of which you may never want to hold overnight, but if done right, this strategy could actually mitigate risk by avoiding buying during volatile times of the day and selling when stocks are usually at their day’s high.
Okay, okay, but can you actually buy and sell a stock on the same trading day an unlimited number of times on Robinhood without having at least $25,000 in your account?
Here’s how: You see, Robinhood’s rules are you can only have 3 day trades in a sliding 5 trading day window. Exceeding this 3 day trade limit will restrict your account from placing any further trades for 90 days, BUT this limit only applies to Robinhood Instant and Robinhood Gold accounts!
According to Robinhood, this 3 day trade limit does not apply to cash accounts, so if you opt out of Robinhood Gold and Robinhood Margin account, you would then be able to day trade as many times as you want.
However, there is a drawback.
Cash accounts do not have instant deposits or instant settlement like a Margin account does. This means, if you deposit cash, it may take a few days for all of that cash to settle in your account to trade with. This also means, that when you sell a stock, the cash has to settle into your account for you to use to trade with again.
So for example, say you had $1,000 and went all in on stock XYZ, and it went up 10% and you sold. You have to wait a few days for that $1,100 to settle into your account before you can use it to trade.
Simple fix, divide up your cash pool into multiple portions, at least 2, preferably 3 or more. So when you enter a trade, and sell, you’d always have cash in hand to buy again!
Big thanks to JP for the knowledge on unlimited day trades with Robinhood Cash account. Check out his blog here, I’m sure you can find something new and worthwhile. Cheers.