Day trading is something that gets a lot of attention, and it’s easy to understand why. It’s a fast-paced, exciting investment option. If you know what to do and how to do it, it’s possible to earn profits quickly.
But can you day trade crypto on Robinhood with a brokerage account? The short answer is yes, you can, just as you can day trade stocks. In fact, crypto day trading has become very popular on Robinhood within a trading day.
The next question is this: Is day trading crypto something you should do? That’s a harder question to answer. Day trading crypto, like options trading, is not right for everybody. Keep in mind, you’ve got to be comfortable with risk and knowledgeable about crypto in general and about the specific cryptocurrencies you want to day trade.
In this guide, we’ll uncover Robinhood’s rules around day trading in it’s brokerage account, the limits you need to know, and provide some tips and strategies to increase the chances that your crypto day trading will be successful and profitable.
What Is Day Trading Crypto on Robinhood?
Let’s start with a simple definition of day trading in case you’re not familiar with the term. Day trading is the process of buying and selling a security on the same trading day. A security may be a stock or a cryptocurrency such as Bitcoin or Ethereum and does not involve options trading.
The point of day trading is to take advantage of volatility in the market. When there are intraday price movements, day traders can take advantage of that volatility by buying and selling quickly. A simple example might be buying a stock at $100 per share in the morning, and then selling at $104 in the evening for a net profit of $4 per share.
Cryptocurrency day trading is popular for a reason. While any security can change prices in the course of a trading day, cryptocurrencies are highly volatile and prices move rapidly. When there are big fluctuations in price, day traders can earn a lot of money.
Day trading may involve buying low and selling high, but it can also involve short-selling high and covering at lower prices.
Robinhood simplifies the trading process, making it quick and easy to buy and sell crypto – and a good choice for beginners who want to try out day trading. There are some things you’ll need to be aware of, and we’ll get into that in the next section.
Day Trading Crypto on Robinhood: Best Practices and Strategies
As you might imagine, there are some best practices that can help you minimize your risks with crypto day trading and maximize the chances that you’ll earn a profit.
Top Strategies for Day Trading Crypto
The best strategies for day trading crypto have a lot in common with day trading stocks or any other assets, with a few notable exceptions.
- Choose coins with high liquidity and high volatility. The former means that you’ll choose coins with high trading volume, so there are enough buyers and sellers in the market. The latter is essential because it ensures there’s enough price movement for day trading to be profitable. So, for example, stable coins have less volatility and aren’t good candidates for crypto day trading.
- Momentum trading involves identifying assets that are trending in one direction and making trades based on the trend, similar to momentum in options trading.
- Scalp trading is a strategy that involves making multiple small trades throughout the day. It requires keeping a close eye on the market and making quick trades.
- Reversal trading involves identifying assets with a lot of price movement and placing a trade on the assumption that the trend will reverse.
In each of these cases, you’ll need to time your trades appropriately to minimize your risk and maximize your earnings.
Risk Management Essentials
There are a few things you can do to manage your risk when day trading cryptocurrencies, but keep in mind that all crypto investing comes with a higher risk than investing in more stable assets such as stocks, bonds, and ETFs.
- Make sure you understand the fee structure. For example, Robinhood offers zero-commission trades, but that doesn’t mean there aren’t fees. In the case of Robinhood, spread fees are charged to account for volatility and in most cases, Robinhood can keep the difference between your final price and the spread.
- Look out for maker/taker fees. Simply stated, if you’re making liquidity in the market, you’re typically charged a lower fee than if you’re taking liquidity from the market.
- Be aware of fee differences based on volume. Some platforms charge more for small trades than they do for large ones.
- Don’t buy more crypto than you can afford to lose. Because of its extreme volatility, it’s risky to buy crypto. Make sure that you don’t risk more in day trading crypto than you can afford to lose.
Investing in crypto is inherently risky, so it’s essential to be aware of those risks and how they can impact you if you decide to engage in crypto day trading.
Using Robinhood Tools for Day Trading Success
One of the reasons that Robinhood’s brokerage account is a good choice for day trading is that they provide some free tools, as well as commission free trading that traders can use to their benefit.
- Day trade counter, a tool that allows you to track how many day trades you’ve executed in the most recent 5-trading day period.
- Pattern day trade protection sends you an alert when you’re about to place your 4th day trade in a 5-day period. (More about pattern trading below and whether it applies to crypto.)
- One-time pattern day trading flag removal. Pattern day trading can be an issue if you’re using a margin account, but some Robinhood users may be able to successfully appeal for one-time removal of restrictions imposed after being flagged.
- Market news can be useful for keeping an eye on any cryptocurrency you’re trading.
The first three tools are specifically designed to help Robinhood users execute successful day trades without violating the rules. We’ll talk later about whether these rules apply to crypto day trading.
Pro Tip:
Sign up with Robinhood today! You can refer friends to earn up to $1500 per year in FREE STOCK!
Mistakes to Avoid When Day Trading Crypto
Because day trading crypto is inherently risky, like options trading, you’ll need to understand your own limitations and the common mistakes people make and learn how to avoid them.
| Crypto Day Trading Mistake | Avoid It By… |
| Being overly reactive, e.g. executing a trade right after news breaks about an asset. | Taking a deep breath and giving some thought to the news and what it means before you execute a trade. |
| Risking more than you can afford to lose. | Thinking about the worst case scenario and deciding if you can live with it before you put your money at risk. |
| Not having a trading strategy. | Learning as much as you can about day trading in general and crypto day trading in particular, then creating a strategy to follow. |
| Reinforcing losing positions. | Evaluating each situation on its merits and not being afraid to pull out when the tide is clearly going against you. |
| Not using tools to help you track your trades and make the most of them. | Using a trading platform that offers specific tools to help day traders, including price alerts and warnings to help you avoid being flagged as a pattern day trader. |
How Many Times Can You Day Trade Crypto on Robinhood?
Day trading has some limitations, even though Robinhood offers commission free trading. You might have heard that Robinhood doesn’t allow day trading. That’s not true, but you will need to be careful to follow their ground rules to avoid being penalized by making trades on the same trading day, even in cash accounts.
Understanding Robinhood’s Day Trading Limits for Crypto
The only real limitation on day trading on Robinhood, aside from your own limitations, has to do with pattern day trading. Here are the circumstances when you may get flagged as a pattern day trader.
- You execute four or more day trades within a five-day period or during a settlement period
- The day trades you make account for <6% of your total trades within a margin broker account, rather than a cash account
These are not rules that originated with Robinhood; they come from FINRA, a federal agency that regulates trading platforms, including Robinhood.
As of the end of 2024, crypto is not subject to the same day trading limitations as stocks because it’s not regulated in the same way. You should still know that there are two ways to exceed the limit on the number of trades and not be penalized. The first is to trade with a margin account with a balance of $25,000 or higher. The second is to use a cash account instead of a margin account.
If you break these rules by making multiple day trades using a margin account with a balance that’s less than $25K, the punishment is a 90-day ban from trading on Robinhood. There’s always a possibility that crypto could end up being subject to this rule or settlement period, which is why we’re including it here.
Practical Scenarios for Crypto Day Trading Frequency
Assuming you want to day trade crypto on Robinhood, here are some practical scenarios to consider.
News-based day trading involves reading market news related to cryptocurrency and making predictions on what will happen with the price over the course of the day. For example, you might see a news story announcing that a major bank will start accepting a specific crypto coin as payment. You could buy that coin based on your assumption that the coin will gain value during the trading day.
Another scenario might be looking at the overall trend of a coin and making a prediction on whether the trend will continue or switch before the market closes.
Either way, you’ll need to keep an eye on the price. While you can set up a stop-loss, which we’ll talk about in the next section, you may also need to make a call before the stop loss based on what’s happening with your asset.
Pro Tip:
Sign up with Robinhood today! You can refer friends to earn up to $1500 per year in FREE STOCK!
Tips to Maximize Daily Trades on Robinhood
Here are a few quick tips to help you maximize your crypto day trades on Robinhood.
- Set up a stop-loss order for each trade. For example, you might decide to sell if the coin you buy drops by 10%.
- Set up price alerts for every trade. These alerts will help you make rapid-fire decisions as needed. An example might be if you bought Solana and the price rose 11%. You might decide to avoid the risk that the price will drop and capitalize to make an 11% profit.
- Avoid making trades right after the market opens, when things are at their most volatile. There may be a lot of people making trades based on overnight news, so you’ll be well served by sitting back and waiting just a little while to let things settle down.
- Keep a close eye on the money in your margin account. You don’t want to risk the balance falling below $25K if you’re trading every day with a margin account.
These tips can help you minimize your crypto day trading risk and avoid being labeled as a pattern day trader if the rules happen to change.
Benefits and Drawbacks of Day Trading Crypto on Robinhood
There are a few benefits and drawbacks to day trading crypto on Robinhood.
Benefits:
- Crypto’s volatility means there’s a chance to make a solid profit if you can predict price movements accurately.
- Robinhood provides specific tools, including the day trade counter, to help you monitor your trading activity and avoid penalties.
- The intuitive trading platform means you can execute trades quickly to take advantage of price increases.
- Pattern Day Trader rules don’t currently apply to crypto on Robinhood
Drawbacks:
- Day trading crypto is inherently risky, so there’s always a chance that you could lose money.
- Robinhood offers only 20 cryptocurrencies to trade.
- Pattern day trader rules may eventually apply to crypto, so if you use a margin account you’ll need to have a minimum balance of $25K to make multiple day trades to avoid penalties versus using cash accounts.
Pro Tip:
Sign up with Robinhood today! You can refer friends to earn up to $1500 per year in FREE STOCK!
Can You Day Trade Crypto on Robinhood Without $25K?
One of the most common questions we get about crypto trading on Robinhood is this: Can you day trade crypto on Robinhood without $25K? Here’s what you should know.
What is the $25K Rule in Day Trading?
The $25K in day trading rules says that if you’re using a margin account for day trading, you must have a minimum balance of $25K in that account if you want to execute four or more trades in any five-day trading rules period.
Crypto Trading: An Exception to the $25K Rule
Cryptocurrency is somewhat regulated in the US, but not in the same way stocks and other assets are. As of December 2024, you can execute as many crypto day trades as you want using a margin or cash accounts without accruing any penalties in a trading day.
Potential Limits for Crypto Day Trading
It’s important to note that additional regulations on crypto trading and cash accounts could be on the horizon. One of the appeals of crypto is that it’s decentralized and largely unregulated, but make sure to keep an eye on the news and prepare to change strategies if the rules change.
Conclusion
The bottom line is that you can day trade cryptocurrency on Robinhood. It’s a risky way to earn money and for that reason, it’s necessary to have a strategy. The $25K rule doesn’t (yet) apply to cryptocurrency day trading, but pay attention to any changes and be prepared to rethink your strategy as needed.
FAQs
No. While Robinhood doesn’t charge commission, there is a network fee. Robinhood also creates a spread on all transactions, including crypto day trades, to protect against volatility. They have the right to keep the difference between the spread and the actual price at the time of the trade.
We think it is the best because of its comparatively low fees and quick trading process.
The risks of day trading crypto are mostly related to losing money. Cryptocurrencies tend to be far more volatile than stocks and ETFs, so you should never invest more than you can afford to lose.
You can start day trading crypto by setting up and funding an account. You can use either a cash account or a margin account. Think about your strategy, and then place your first trade, making sure to avail yourself of Robinhood’s day trading tools to minimize your risk.
