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When I first started to day trade I got penalized with PDT (pattern day trading) because my Robinhood margin account did not meet the requirement of $25,000 for unlimited day trades. Are there solutions to get around the PDT rule and get unlimited day trades?
The answer is yes. There are 2 solutions to get unlimited day trading on Robinhood:
Let’s talk a little bit more about each one of these solutions.
The simplest answer but not the easiest is to just add $25,000 to your Robinhood margin account.
With a margin account you may be able to trade with settled and unsettled funds; but this comes at a cost. If your account is worth less than $25,000 you will only have 3 day trades within 5 business days.
If you go beyond 3 day trades with an account less than $25,000 you will a good faith violation.
This type of account has pros and cons, but I believe the pros outweigh the cons.
The pro is that this type of account gives you unlimited day trades with as a little money as possible and not get penalized as a PDT (pattern day trader). You don’t need the $25,000 requirement.
For example, let’s say you have $1,000 in your Robinhood cash account. You can make 5 day trades by splitting settled funds by $200 each trade and not be restricted on only 3.
Here’s the con to this type of account; because the account is not margin that means you have to wait a full business day for the cash to settle.
So in the example above, if you make a $200 trade and you sell on the same day, you now have $800 of settled cash remaining, and $200 of unsettled cash. Unsettled cash is not tradable.
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