Are you interested in day trading? If so, you’re probably wondering which trading and investment platform is best to use and what the rules are. You may even need a bit of guidance to understand what day trading is and some tips on how to succeed with it.
Robinhood day trading is popular with many investors. Its simple interface and well-reviewed mobile app make it a good choice for both experienced traders and those who are just getting ready to explore the stock market and day trading through a brokerage account.
Is Robinhood good for day trading? What rules apply? Is $25K necessary to start day trading? These are all important questions to ask.
In this article, we’ll tell you all about how to day trade on Robinhood, fill you in on Robinhood day trading rules, commission free trades, and give you an actionable plan to get started. Keep reading to learn all about it!
What is Day Trading on Robinhood?
Day trading is the practice of buying and selling securities on the same trading day. It’s something that allows traders to earn a quick profit if they can capitalize on short-term movements in price.
We all know the market can be volatile. With day trading, it’s possible to take advantage of volatility… if you time your trades correctly. If you don’t, there’s a risk you could lose money. In other words, day trading is the opposite of a long-term investment.
Some securities that can be bought and sold in day trading are stocks, options, and other financial instruments. You’ll have to understand the risks and be prepared to make quick decisions. For that reason, we don’t recommend day trading for beginners.
If you’re wondering, can I day trade on Robinhood, keep reading to learn the rules.
Pro Tip:
Sign up with Robinhood today and receive a 100% free partial share.
Is Day Trading Allowed on Robinhood?
There’s some information out there saying that Robinhood doesn’t allow day trading. That’s not strictly true. What they limit is something called Pattern Day Trading.
Robinhood will flag you as pattern day trader if you:
- Execute 4+ day trades within a five-day period
- The day trades account for <6% of your total trades with a margin brokerage account
Keep in mind that these rules come from FINRA, which regulates Robinhood and other trading platforms.
The one exception here is that if your brokerage account balance is more than $25,000 at the end of the trading day when you’re flagged as a pattern day trader, there’s no penalty.
You should know that if you break these rules and your account balance isn’t over $25K, you’ll be punished with a 90-day ban from trading on Robinhood. That’s why it’s so important to be aware of the rules and operate within Robinhood’s brokerage account guidelines.
Is day trading on Robinhood worth it? Is it safe? We say that it can be, but again, we don’t recommend it for beginning investors. You’ll need a strong grasp of the risks and rewards of day trading and enough money to avoid being penalized.
Is Robinhood Good for Day Trading?
With the rules explained, you’re probably wondering whether Robinhood is good for day trading. Keep reading to learn more.
What are the Pros and Cons of Robinhood Day Trading?
Here are some of the pros of using Robinhood for day trading.
- There’s no fee for trades
- Margin rates are low
- You can trade online or using their desktop and mobile apps
- Robinhood is easy to use
A few potential downsides to consider include these.
- There are trading restrictions in place
- There’s a fee for order flows
- Customer service is not the best
The customer service issue is one we’ve mentioned in other Robinhood reviews. You’ll need to send a message through the app and wait for a response, which may not be ideal for someone who’s just starting out as a day trader.
Best Practices for Day Trading on Robinhood
Follow these best practices to avoid breaking the Robinhood day trading rules.
- Evaluate your risk tolerance. Day trading isn’t for the faint of heart and if you’re someone who gets anxious at the thought of losing money, day trading isn’t for you.
- Research ahead of time and develop a day trading strategy to follow. For example, you’ll need to stay up-to-date on market trends, understand technical indicators, and make sure you understand the rules.
- Understand the order types that are allowed on Robinhood. These include: market orders, limit orders, stop orders, stop limit orders, and trailing stop orders.
- Choose securities with high liquidity and high volatility, since these offer the best chance to make a profit while day trading.
- Watch the market closely. Remember, day trades need to be fully executed intraday, so you’ll need to stay on top of the market.
- Make quick decisions. Any delay in selling can mean the difference between profit and loss in a day trade.
Following these best practices will help to minimize your risk and maximize your chances of success.
Pro Tip:
Sign up with Robinhood today and receive a 100% free partial share.
How to Day Trade on Robinhood
Here are the steps you’ll need to follow to day trade on Robinhood.
- Download the Robinhood app or visit their website.
- Click Sign Up.
- Fill in the form with your first and last name as they appear on your government-issued ID.
- Fill in your address and phone number.
- Wait for a response. You may be required to upload a copy of your ID and if you are required to do so, you’ll get instructions about how to do it.
Keep in mind that it may take 6-7 days to get signed up. Once you’re signed up, you’ll need to do some homework to find stocks to trade.
In general, you’ll want to focus on stocks that are moving constantly within the trading day. The easiest way to find these on Robinhood is to click on Investing and then Daily Movers.
Keep in mind that you’ll probably need more detail than you can get on Robinhood. For example, you’ll want to monitor:
- Highest percentage gainers or losers
- Top volume in the premarket
- Price
You’ll also need to set trade parameters, which will automatically sell the shares you buy according to your instructions. For example, a stop loss order would kick in if a stock you own drops below a limit that you set.
To set trade parameters, you’ll need to click on a stock you own and follow the instructions. Here’s an example of Tesla stock on November 15, 2024.
The stock opened at $310.57 and as of the time we took this screenshot, it was up to $321.05, an increase of 3.34%. Because this is a very volatile stock, you might want to set a stop loss at $305, meaning your stock would automatically be sold if the price sank below the limit you set.
The most important thing to remember about how to day trade on Robinhood is to close the trade by the end of the market day, which means before 4 PM Eastern time.
Can You Day Trade on Robinhood Without $25K?
Can you day trade on Robinhood without $25K? The short answer is YES, but there are some rules you’ll need to follow.
As we noted above, you will need a minimum of $25K if you’re going to engage in Pattern Day Trading with a margin account on Robinhood. If you don’t meet that minimum, your trading account will be suspended for 90 days.
The good news is that there is one way to day trade on Robinhood even if you don’t have $25K in your account. You won’t be able to use a margin account, but you can use a cash account.
The primary difference between the two is that with a cash account, you can only buy securities with the money you have in your account at the time. With a margin account, you have the option to borrow money from a brokerage (in this case, from Robinhood), an option that comes with the potential for higher gains but also carries significantly more risk.
If you want to get your feet wet with day trading, we suggest starting with a cash account and keeping your trades small at first. That way, you can learn the ropes, get comfortable with the process and the potential risks and rewards, and hopefully make some money along the way.
Keep in mind that the $25K rule for day trading with a margin account is there because of FINRA, which regulates brokerages. It’s not something you can work around unless you use a cash account instead.
If you do want to engage in the Pattern Day Trading Rule, you’ll need to make sure that you have a minimum of $25K in your margin account with enough wiggle room to cover you if you take a loss during the day.
Essential Tips for Day Trading Success
Here are a few important tips for day trading success with Robinhood.
- Use a stock research service. While Robinhood has some watchlists and tools, you’ll probably need a more in-depth service to research stocks.
- Scan the market at night. It’s difficult to make successful day trades, but it gets harder if you’re not prepared going into the day. After the market closes, review the top movers and choose your stocks to watch for the next day.
- Keep your watch list to no more than 10 stocks. Any more than that may become overwhelming.
- Decide how much money you’re willing to risk each day and plan your trades accordingly.
- Start small until you’re comfortable with the basic principles of day trading. You may even want to consider starting with fractional shares.
- Keep your emotions in check. Day trading should be disciplined and consistent.
- Don’t fall into a gambling mindset. If you have a big day, that’s great. That doesn’t mean that it’s wise to change your stop loss limits or spend more money than you can afford to lose.
Follow these tips and you’ll be in good shape to get familiar with day trading and make it part of your overall investment strategy.
Pro Tip:
Sign up with Robinhood today and receive a 100% free partial share.
Conclusion
Robinhood is an app that makes day trading relatively easy with commission free trades, provided that you understand and follow the rules. Remember, the most important rule is that you must be careful not to engage in the Pattern Day Trading Rule with less than $25k in your margin account, but that limit doesn’t apply if you use a cash account.
Use the tips and guidelines we’ve included here to get started day trading with confidence on Robinhood.
If you are curious about how Robinhood compares to other popular brokerages, such as Fidelity, check out our new article comparing the two here!
Yes, you can day trade on Robinhood, but you’ll need to be mindful of the rules. You can engage in Pattern Day Trading with a margin account provided you maintain a balance of $25,000 or more. You won’t need the $25K balance if you use a cash account.
Yes, but you can’t do it with a margin account unless you keep your trades outside of the Pattern Day Trading rules. (That means you must execute <4 trades in any five-day period and your day trades must account for <6% of your total trades.) These limits don’t apply if you day trade with a cash account.
Yes, Robinhood is a good platform for day trading, with a few caveats. There isn’t a ton of research available on Robinhood, so we suggest using other tools to monitor the market at the start and end of each day and choose which stocks to buy. We like that Robinhood has options such as stop losses and stop loss limits that allow day traders to manage their trades.
