Have you ever been excited about a quick profit, bought a stock, sold it within hours, and then tried to buy something else, only to find yourself in a sticky situation with your brokerage? If you trade with a cash account on Webull, you might have encountered or be at risk of a Good Faith Violation (GFV). It's a common pitfall for new traders, but with a clear understanding and a few careful steps, you can easily avoid it.
This lengthy guide will walk you through everything you need to know about Good Faith Violations on Webull, from understanding what they are to proactively preventing them.
Understanding the Basics: Settled vs. Unsettled Funds
Before we dive into the "how-to," let's clarify a crucial concept: settled vs. unsettled funds.
Settled Funds: These are funds that are fully available for you to use. When you deposit money into your Webull account or sell a stock, the funds don't become "settled" instantly. There's a settlement period, typically T+1 (Trade Date + 1 business day) for stocks and options in the United States. This means if you sell a stock on Monday, the cash proceeds won't be fully settled and available for withdrawal or unrestricted trading until Tuesday.
Unsettled Funds: These are funds from a recent sale that have not yet completed the settlement process. Webull, like many brokers, often provides you with "instant buying power" or "provisional credit" based on these unsettled funds. This allows you to place new trades before the original sale officially settles. However, using these unsettled funds incorrectly is precisely what leads to a Good Faith Violation.
What Exactly is a Good Faith Violation (GFV)?
A Good Faith Violation occurs when you:
Purchase a security (e.g., a stock) using unsettled funds. This means you bought it with money that originated from a recent sale that hasn't officially settled yet.
Then, you sell that newly purchased security before the original funds used to buy it have fully settled.
In simpler terms, you're essentially "freeriding" on credit from a previous sale that hasn't cleared. The broker-dealer essentially "spots" you the money to buy the second stock, expecting the first sale to settle and cover it. If you then sell that second stock before the first sale has settled, you're breaking the "good faith" agreement that you would hold the second stock until the funds to pay for it were genuinely in your account.
Example Scenario:
Let's say you have a cash account on Webull.
Monday Morning: You have $0 settled cash. You sell Stock A for $1,000. Your "available cash" or "buying power" on Webull immediately shows $1,000, even though this $1,000 is still unsettled (it will settle on Tuesday, T+1).
Monday Afternoon: You use this $1,000 (unsettled funds) to buy Stock B.
Later Monday Afternoon: Stock B goes up! You're excited and sell Stock B for $1,050.
BINGO! You've just incurred a Good Faith Violation. Why? Because you sold Stock B before the $1,000 from the sale of Stock A had settled. You used unsettled funds to buy Stock B and then sold Stock B before those underlying funds were genuinely yours.
How to Check for a Good Faith Violation on Webull: Your Step-by-Step Guide
While Webull aims to provide notifications and warnings, it's crucial to know how to proactively check your status. Unfortunately, Webull doesn't have a single, prominent "GFV Tracker" or a dedicated section specifically for GFV warnings in the same way some other brokers might. However, you can infer your status and see warnings in certain situations.
Step 1: Engage with Your Balances – The Heart of the Matter!
Alright, let's get hands-on! Open your Webull app or log in to the desktop platform. The most critical place to monitor your account health and potential GFV issues is within your "Account" or "Assets" section, specifically focusing on your cash balances. Don't just glance at your total account value; dig deeper into the breakdown!
Step 2: Navigate to Your Account/Assets Page
On the Webull App:
Tap the Webull logo (usually located at the bottom center of your screen). This will take you to your main account overview.
Look for a section related to your "Assets," "Account Details," or "Total Assets." This is typically where your cash and equity balances are displayed.
You might need to tap on your specific brokerage account if you have multiple accounts linked (e.g., an IRA and a standard brokerage account).
On the Webull Desktop Platform:
Log in to your Webull desktop application.
On the left-hand side or top menu, find and click on "Account" or "Assets."
Again, ensure you've selected the correct brokerage account if you manage more than one.
Step 3: Examine Your Cash Balances: Settled vs. Unsettled
This is where the magic (or the potential for a GFV) happens. Look for a detailed breakdown of your cash.
Look for "Settled Cash" or "Settled Funds": This figure represents the money that is truly available for unrestricted trading or withdrawal without risking a GFV. This is the most important number to pay attention to for GFV avoidance.
Look for "Buying Power" or "Available Funds": This number often includes unsettled funds. While it shows you what you can buy immediately, it doesn't tell you if those funds are settled. If your "Buying Power" is significantly higher than your "Settled Cash" and you've recently sold securities, it's a strong indicator that a portion of your buying power is unsettled.
Look for "Unsettled Funds" or "Proceeds from Sales": Some brokers explicitly show this line item. If Webull does, this is a direct indicator of funds that are still in the settlement period. If you see a balance here, be cautious about using it for immediate re-trading.
Step 4: Watch for Notifications and Warnings During Trades
Webull often provides proactive warnings when you're about to make a trade that could lead to a GFV.
During a Buy Order: If you attempt to buy a stock with funds that are unsettled, you may see a pop-up warning or a message near the order confirmation screen. It might state something like: "This purchase may result in a Good Faith Violation if sold before settlement. Please ensure sufficient settled funds." DO NOT ignore these warnings!
In-App Messages/Notifications: Webull may send you push notifications or in-app messages if your account is approaching GFV limits or if a GFV has been incurred. Check your "Messages" or "Notifications" center within the app regularly.
Step 5: Review Your Trade History
While not a direct "GFV checker," reviewing your trade history can help you manually identify potential GFV scenarios.
Go to your "Account" or "Assets" section.
Look for "Order History" or "Trade Records."
Examine your recent sales and purchases. Pay attention to the dates. If you sold a stock and then bought another with the proceeds on the same day, and then sold that second stock before the first sale settled, you likely incurred a GFV.
Key Takeaway: The best way to "check" for a GFV on Webull is to consistently monitor your settled cash balance and pay close attention to any warnings the platform provides when you place trades.
Consequences of Good Faith Violations on Webull
Webull, like other brokerage firms, enforces regulations to prevent good faith violations. The consequences are usually progressive:
First Violation: Typically, you'll receive a warning notification. It's a gentle reminder to understand the rules.
Second Violation: Another warning, often more stern.
Third Violation within a 12-month period: This is where it gets serious. Your cash account will likely be restricted to purchasing securities with settled cash only for a period, typically 90 days. This means you cannot use any unsettled funds or instant buying power. You must wait for all funds to settle before initiating any new trades.
Fourth or Fifth Violation: Repeated violations can lead to further restrictions, including a "sell only" restriction for an extended period (e.g., 90 days), or even account suspension.
These restrictions are imposed by clearing houses and regulatory bodies (like FINRA) and are not Webull-specific policies that they can easily waive.
How to AVOID Good Faith Violations on Webull: Your Action Plan
Prevention is always better than cure! Here's your comprehensive step-by-step guide to avoiding GFVs:
Step 1: Prioritize Understanding Settlement Times
Know the T+1 Rule: For most stocks and options in the US, trades settle on T+1 (Trade Date + 1 business day). This means if you buy or sell on a Monday, the funds or securities will settle on Tuesday. For example, if you sell a stock on Monday, don't plan to use those specific funds to buy and immediately sell another stock until Wednesday.
Calendar Awareness: Be mindful of weekends and holidays. If you sell on a Friday, the T+1 settlement won't be until Monday (assuming no holidays).
Step 2: Always Check Your "Settled Cash" Balance
Make it a Habit: Before initiating any new trade, especially after a recent sale, always check your "Settled Cash" balance in your Webull account.
Trade with Settled Funds: The simplest way to avoid a GFV is to only place buy orders using your fully settled cash. If your "Buying Power" is higher than your "Settled Cash," understand that the difference is unsettled funds.
Step 3: Wait for Funds to Settle Before Re-Trading
Patience is a Virtue: If you've sold a stock and plan to use those specific proceeds to buy another stock, and you intend to sell that second stock relatively quickly, wait until the proceeds from your initial sale have settled.
Hold Your Newly Purchased Stock: If you used unsettled funds to buy a new stock, do not sell that new stock until the funds that were used for its purchase have completely settled.
Step 4: Consider Depositing More Funds
Top Up Your Account: If you find yourself frequently running into GFV issues because you're trading with unsettled funds, consider depositing additional cash into your Webull account. Having a larger settled cash buffer gives you more flexibility.
Plan Deposits: Remember that deposited funds also need to settle (typically 2-4 business days for ACH transfers) before they become fully available as settled cash.
Step 5: Understand Margin Accounts (with Caution!)
GFVs Apply to Cash Accounts: Good Faith Violations are primarily a concern for cash accounts.
Margin Accounts Offer More Flexibility (but More Risk): Margin accounts allow you to borrow money from Webull to trade, and they typically do not have GFV rules because you're using borrowed funds rather than waiting for your own funds to settle.
Not a GFV Solution for Everyone: While margin accounts avoid GFVs, they introduce other risks like margin calls and the potential to lose more than your initial investment. Do not switch to a margin account simply to avoid GFVs without fully understanding the associated risks. Margin accounts have their own set of complex rules, including Pattern Day Trader (PDT) rules.
Step 6: Read Webull's Notifications and Policies
Pay Attention: Webull will warn you if a potential GFV is about to occur when you place an order. Don't click through these warnings blindly! Read them and understand what they mean.
Review Webull's Help Section: Familiarize yourself with Webull's official policies on Good Faith Violations, settlement times, and cash account rules. These resources are designed to help you.
Related FAQ Questions
Here are 10 related FAQ questions, all starting with "How to," with their quick answers:
How to understand "settled cash" on Webull?
Quick Answer: Settled cash is the money in your account that has completed the trade settlement period (usually T+1 for stocks/options) and is fully available for trading or withdrawal without restriction.
How to avoid Good Faith Violations when day trading on Webull?
Quick Answer: In a cash account, avoid day trading (buying and selling the same security on the same day) using unsettled funds. Wait for all funds to settle (T+1) before initiating new trades you intend to close quickly. For more flexibility with day trading, a margin account (with its own rules and risks, like PDT) is typically used.
How to check my settlement dates for recent trades on Webull?
Quick Answer: While Webull doesn't always show explicit settlement dates on every transaction, you can generally assume T+1 for stocks and options. Monitor your "Settled Cash" balance to see when funds become fully available.
How to know if a trade I'm about to make will cause a GFV on Webull?
Quick Answer: Webull will often display a warning message on the order confirmation screen if your current trade, when combined with your recent activity, could lead to a GFV if you sell the newly purchased security before its underlying funds settle. Always read these warnings carefully.
How to recover from a Good Faith Violation on Webull?
Quick Answer: For individual GFVs, typically nothing immediate needs to be done beyond being aware. However, if you incur three GFVs within 12 months, your account will be restricted to settled funds only for 90 days. The only "recovery" is to wait out the restriction period and ensure you only trade with settled funds going forward.
How to determine if I have a cash or margin account on Webull?
Quick Answer: On the Webull app, tap the Webull logo (bottom center), then look for "Details" in the upper right corner. This section will specify your account type (cash or margin).
How to deposit funds into Webull to prevent GFVs?
Quick Answer: On the Webull app, go to "Transfers" (usually near your account balance) and select "Deposit." Choose your preferred deposit method (e.g., ACH bank transfer) and follow the instructions. Remember, deposits also have a settlement period before becoming settled cash.
How to understand the difference between "buying power" and "settled cash" on Webull?
Quick Answer: "Buying Power" on Webull often includes unsettled funds, giving you immediate credit for recent sales. "Settled Cash" is the portion of your balance that is fully cleared and available without restriction, and it's the amount you should focus on to avoid GFVs.
How to avoid a "sell only" restriction due to GFVs on Webull?
Quick Answer: Consistently avoid accumulating three or more Good Faith Violations within a rolling 12-month period in your cash account. Always trade with settled funds, or hold newly purchased securities until the funds used for their purchase have settled.
How to contact Webull support if I have questions about a GFV?
Quick Answer: You can contact Webull support through their in-app chat, email, or by phone. Navigate to the "Menu" or "More" section in the app, then look for "Help Center" or "Customer Service" to find contact options. Explain your situation clearly.
