Ever felt the rush of buying a stock, seeing it jump, and wanting to sell it for a quick profit all within the same day? That's day trading! And if you're using Webull, understanding the rules around it is absolutely crucial. Otherwise, you might find yourself hitting some unexpected roadblocks.
This guide will break down everything you need to know about day trading on Webull, from the official rules to how you can navigate them. Let's dive in!
Understanding Day Trading and the PDT Rule on Webull
Before we get into the specifics of "how many," let's clarify what a day trade actually is and the rule that governs it.
What is a Day Trade?
A day trade is defined as the opening and closing of the same security position within the same trading day. This applies whether you buy then sell, or sell short then buy to cover, within regular trading hours, pre-market, or after-hours.
The FINRA Pattern Day Trader (PDT) Rule
The Financial Industry Regulatory Authority (FINRA), a self-regulatory organization, established the Pattern Day Trader (PDT) rule to protect investors, particularly those with smaller accounts, from the inherent risks of frequent day trading.
Step 1: Are You a Pattern Day Trader? Engage with this question!
Think about your trading habits: Have you bought and sold the same stock, ETF, or option contract on the same day? If so, you've made a day trade!
The PDT rule states that if you execute four or more day trades within a rolling five-business-day period in a margin account, and these day trades constitute more than 6% of your total trades during that period, you will be flagged as a Pattern Day Trader. This flag comes with significant implications.
Webull and the PDT Rule: How Many Day Trades Are Allowed?
The number of day trades allowed on Webull largely depends on the type of account you have and its equity balance.
Step 2: Differentiating Between Account Types
Webull offers both cash accounts and margin accounts. The PDT rule primarily impacts margin accounts.
2.1: Day Trading with a Margin Account
This is where the PDT rule comes into play. If your Webull account is a margin account, here's the breakdown:
Under $25,000 Equity: If your margin account's equity balance (cash + securities value) is below $25,000, you are generally limited to three day trades within any rolling five-business-day period. Exceeding this limit will flag you as a Pattern Day Trader.
What happens if you're flagged and under $25,000? Your account will be restricted to "closing-only" transactions. This means you can only sell existing positions to close them, but you cannot open any new positions. This restriction typically lasts for 90 days or until you bring your account equity above the $25,000 threshold.
$25,000 Equity or Above: If your margin account maintains an equity balance of $25,000 or more at the close of the previous business day, the PDT rule essentially doesn't limit the number of day trades you can make. You can day trade as frequently as you wish without being flagged for the PDT rule, as long as you maintain that $25,000 minimum.
Important Note: This $25,000 must be present in your account before any day trading activity on a given day. Intraday fluctuations that temporarily bring your account above $25,000 won't qualify.
2.2: Day Trading with a Cash Account
Good news for those with smaller account balances! The PDT rule does not apply to cash accounts.
In a cash account, you can perform an unlimited number of day trades, provided you have settled funds available for each trade.
The Catch: The main limitation with a cash account is the "settlement period." When you sell a security, the funds typically take T+2 business days (trade date plus two business days) to settle. This means you cannot use the proceeds from a sale to immediately buy and sell another security on the same day or even the next day. You must wait for the funds to settle before you can use them for new trades without incurring a "Good Faith Violation."
Example: If you buy stock A for $100 and sell it for $105 on Monday, those $105 won't be "settled" until Wednesday. You can't use that $105 to buy stock B on Monday or Tuesday without potentially incurring a Good Faith Violation.
Step 3: Recognizing a Day Trade (Key Examples)
It's crucial to understand what counts as a day trade to avoid unintentional violations.
3.1: Common Day Trade Scenarios
Scenario 1 (Classic Day Trade): You buy 100 shares of XYZ stock at 10:00 AM ET and then sell those same 100 shares of XYZ stock at 2:00 PM ET on the same day. = 1 Day Trade
Scenario 2 (Multiple Buys, Single Sell): You buy 50 shares of ABC at 9:30 AM, then another 50 shares of ABC at 11:00 AM, and finally sell all 100 shares of ABC at 3:00 PM. = 1 Day Trade (It's about opening and closing the position).
Scenario 3 (Single Buy, Multiple Sells): You buy 200 shares of DEF at 10:00 AM. You sell 100 shares at 11:00 AM and the remaining 100 shares at 1:00 PM. = 1 Day Trade
Scenario 4 (Options Trading): You buy-to-open 1 XYZ call option contract at 9:45 AM and sell-to-close that same 1 XYZ call option contract at 1:30 PM. = 1 Day Trade
3.2: What DOESN'T Count as a Day Trade?
Selling a Position Held Overnight: If you bought shares of a stock yesterday and sell them today, it's not a day trade.
Buying and Holding: If you buy a stock today and hold it overnight, even if you sell it tomorrow, it's not a day trade for today.
Different Securities: Buying XYZ stock and selling ABC stock on the same day are not considered a day trade for either security individually.
Step 4: Activating Webull's PDT Protection
Webull offers a feature to help you avoid unintentional PDT violations.
4.1: Enabling PDT Protection
Webull provides "Pattern Day Trade Protection" that can alert you as you approach your day trade limit.
To enable it:
Go to Account (person icon).
Navigate to Menu (3 bars) or Settings (gear icon).
Select Investing.
Scroll to the Day Trade section and select Day Trade Settings.
Ensure Pattern Day Trade Protection is turned On.
4.2: How PDT Protection Helps
On your 2nd and 3rd day trade in a rolling 5-day period, Webull will issue alerts, giving you options to avoid being flagged (e.g., switching to a cash account, or ensuring your equity is above $25,000).
Even if disabled, Webull will still alert you before you place your 4th day trade in the 5-trading-day window.
Important Consideration: This protection is a helpful tool, but it's not foolproof, especially with partial executions of orders. Always keep track of your trades manually as well.
Step 5: What Happens If You Violate the PDT Rule on Webull?
Accidental or intentional, violating the PDT rule has consequences.
5.1: Account Restriction (The "Time Out")
If you are flagged as a Pattern Day Trader and your account equity is below $25,000, Webull will place a 90-day day trading restriction on your margin account.
During this period, your account will be set to closing-only transactions. You can sell positions you already hold, but you cannot open any new positions for day trades.
This is a serious limitation, as it prevents you from actively trading and taking advantage of intraday market movements.
5.2: Equity Maintenance Call
If your account falls below the $25,000 minimum while flagged as a PDT, you will receive an Equity Maintenance (EM) call.
You typically have five business days to meet this call by depositing additional funds to bring your equity back above $25,000.
Failure to meet the EM call can lead to further restrictions, including having your account restricted to cash-restricted status or even forced liquidation of positions.
5.3: PDT Reset
Webull (like most brokers) offers a one-time PDT reset for the lifetime of your account.
This allows you to remove the PDT flag and restore full trading privileges if you've been flagged.
However, once you use it, it's gone. If you're flagged again, the restriction will remain until you meet the $25,000 equity requirement or the 90-day period expires.
Note: PDT reset requests usually need to be submitted by a certain time (e.g., 3:00 PM CT) to be processed the same night.
Step 6: Strategies to Avoid the PDT Rule (and Trade Smartly)
Avoiding the PDT rule can help you maintain trading flexibility.
6.1: Maintain a $25,000+ Balance in Margin Account
This is the most straightforward way to avoid day trade limitations. If your margin account consistently stays above $25,000, you are free to execute as many day trades as you wish.
6.2: Utilize a Cash Account Strategically
For those with less than $25,000, a cash account is your best friend for unlimited day trades.
However, be mindful of settled funds. You cannot "recycle" your capital rapidly. Plan your trades to ensure you have settled cash available for each new purchase. This might mean fewer trades per day if you're using a small amount of capital.
6.3: Swing Trading Instead of Day Trading
Instead of closing positions on the same day, consider swing trading. This involves holding positions for a few days, weeks, or even months, aiming to profit from short-to-medium term price movements.
Since you're not opening and closing positions within the same day, these trades do not count towards your day trade limit.
6.4: Trade Non-Equity Products
The PDT rule primarily applies to equities and equity options.
It generally does not apply to futures or forex trading. If you are interested in frequent, high-volume trading and want to avoid the PDT rule entirely, exploring these markets on Webull (if available and you're eligible) could be an option. However, these markets come with their own unique risks and complexities.
6.5: Monitor Your Day Trade Count
Even with Webull's PDT protection, it's essential to keep track of your day trades manually.
Before placing a trade, ask yourself: "Am I opening and closing this position today? Is this my fourth day trade in the last five business days?"
Frequently Asked Questions (FAQs)
How to check my day trade count on Webull?
You can usually check your day trade count and PDT status within the Webull app under your account settings or through specific notifications. Webull's PDT Protection feature often displays your current day trade count within the rolling five-day period.
How to get rid of the Pattern Day Trader flag on Webull?
The primary ways to remove the PDT flag are to either bring your margin account equity above $25,000 and maintain it, or to wait for the 90-day restriction period to expire. You also have a one-time PDT reset option available for the lifetime of your account.
How to avoid being flagged as a Pattern Day Trader on Webull?
To avoid being flagged, ensure your margin account equity is consistently above $25,000, or limit your day trades to no more than three in any rolling five-business-day period. Alternatively, you can use a cash account, which is not subject to the PDT rule.
How to day trade on Webull with less than $25,000?
If you have less than $25,000, you can day trade using a cash account. Remember that you must have settled cash for each trade, meaning you cannot use the proceeds from a sale to make a new purchase until those funds settle (T+2 business days).
How to understand if a trade counts as a day trade on Webull?
A trade counts as a day trade if you open and then close the exact same security position (buy then sell, or sell short then buy to cover) within the same trading day, including pre-market and after-hours.
How to meet a Webull Equity Maintenance Call?
You can meet an Equity Maintenance call by depositing additional funds (cash or marginable securities) into your margin account to bring its equity balance above the $25,000 threshold. You typically have five business days to do so.
How to request a PDT reset on Webull?
You can usually request a PDT reset through the Webull app or by contacting Webull customer support. Remember, this is a one-time reset for the life of your account.
How to know if my Webull account is a cash or margin account?
You can check your account type (cash or margin) within your Webull account profile or settings. It's usually clearly stated on your account summary.
How to prevent Good Faith Violations on Webull cash accounts?
To prevent Good Faith Violations in a cash account, always ensure you are trading with settled funds. This means waiting for the proceeds from any sale to fully settle (T+2 business days) before using them for a new purchase.
How to learn more about day trading strategies on Webull?
Webull offers various educational resources, including paper trading (simulated trading) where you can practice strategies without risking real money, and a community forum where you can learn from other traders. You can also find numerous external resources online.
