Hey there, fellow trader! Ever found yourself scratching your head about "Good Faith Violations" (GFV) on Webull? You're not alone! It's a common stumbling block for many, especially when navigating the nuances of cash accounts. But don't worry, by the end of this comprehensive guide, you'll be a GFV guru, confidently managing your Webull trades.
Let's dive in and unravel the mystery of GFVs, understand why they happen, and most importantly, how to avoid them like a pro. Ready to take control of your trading experience?
What Exactly is a Good Faith Violation (GFV)?
Before we get into checking for them, let's make sure we're on the same page about what a GFV actually is. Imagine you sell a stock, and the money from that sale shows up in your account immediately. It's tempting to use it right away for another purchase, right? But here's the catch: that money isn't truly "settled" yet.
A Good Faith Violation (GFV) occurs when you:
Purchase a security (like a stock or an option) using funds that haven't fully "settled" from a previous sale.
Then, sell that newly purchased security before the initial funds from the first sale have had a chance to settle.
Think of it like this: you sold your old car and are waiting for the check to clear. You use a promise of that money to buy a new car. If you then sell the new car before the check for the old car has actually cleared, that's a GFV!
Understanding "Settled Funds"
The key to understanding GFVs lies in "settled funds." When you sell a stock or option, the transaction doesn't instantly complete. There's a settlement period where the actual transfer of ownership and money takes place. For most US stocks and options, this is T+1, meaning Trade Date plus one business day. So, if you sell a stock on Monday, the funds generally settle on Tuesday.
Only cash or the sales proceeds of fully paid-for securities qualify as "settled funds."
Why Does Webull Care About GFVs?
This isn't just Webull being nitpicky. Good Faith Violations are a regulatory concern, primarily enforced by FINRA (Financial Industry Regulatory Authority). They're in place to prevent speculative trading with unsettled funds, especially in cash accounts, and to ensure financial stability in the markets.
Step 1: Are You in a Cash or Margin Account? (This is Crucial!)
This is the very first and most important question to ask yourself. Why? Because Good Faith Violations primarily apply to cash accounts. Margin accounts operate differently and generally allow for immediate reinvestment of sale proceeds without incurring GFVs, as long as you stay within your margin limits.
To check your account type on Webull:
Open the Webull App: Launch the Webull application on your mobile device.
Navigate to the "Menu" or "Account" Section: Look for an icon that resembles three horizontal lines (the "hamburger" menu) or a person icon, typically located in the bottom right corner of the screen. Tap on it.
Find "Account Details" or "My Account": Within this section, you'll usually see options related to your account.
Look for "Account Type": Here, it will clearly state whether your account is a Cash Account or a Margin Account.
If you have a Margin Account: You generally don't need to worry about GFVs. However, it's still important to understand how margin works and avoid other violations like day trade calls or Reg-T calls.
If you have a Cash Account: Keep reading! This guide is specifically for you.
Step 2: How to Identify a Potential GFV Situation (Prevention is Key!)
While Webull doesn't have a specific "GFV counter" easily visible on the main screen, you can proactively identify potential GFV situations by understanding your cash flow and settlement times.
Sub-heading: Understanding Your Available Funds
This is where many new traders get tripped up. Webull often shows you a "Cash Available to Trade" or "Buying Power" figure that includes unsettled funds. This doesn't mean all of it is "settled cash" ready for immediate re-use after a quick round-trip trade.
Here's how to think about it:
Settled Cash: This is money that has fully cleared from deposits or settled sales of securities. You can use this money to buy and sell as many times as you like without GFV concerns.
Unsettled Funds: These are proceeds from a recent sale that are available to buy new securities, but they haven't officially settled yet. If you use these to buy a new stock and then sell that new stock before the original funds settle, you get a GFV.
Sub-heading: Scenario Examples to Illustrate GFVs
Let's look at some examples to make this crystal clear:
Scenario A: The Classic GFV
Monday: You have $0 settled cash. You sell Stock X for $500. Your "Cash Available to Trade" now shows $500.
Monday (later): You immediately use that $500 to buy Stock Y.
Tuesday (before Stock X proceeds settle): You sell Stock Y for $510.
Result: GFV! You sold Stock Y before the funds from Stock X had officially settled to pay for Stock Y.
Scenario B: Avoiding a GFV
Monday: You have $500 in settled cash. You buy Stock A for $500.
Monday (later): You sell Stock A for $550. Your "Cash Available to Trade" shows $550 (with $500 of it being the initial settled cash and $50 being unsettled profit).
Tuesday (after Stock A settles): You use the now settled $550 to buy Stock B.
Tuesday (later): You sell Stock B.
Result: No GFV! You had settled funds to cover the purchase of Stock A. Even though the proceeds from Stock A weren't settled when you sold it, you weren't using unsettled funds to then immediately trade something else.
Scenario C: Using Unsettled Funds (The Right Way)
Monday: You have $0 settled cash. You sell Stock X for $500. Your "Cash Available to Trade" now shows $500.
Monday (later): You immediately use that $500 to buy Stock Y.
Wednesday (after Stock X proceeds settle): You sell Stock Y.
Result: No GFV! You waited for the initial funds to settle before liquidating the second position.
Step 3: Where to Find GFV Notifications on Webull
Webull will notify you if you incur a Good Faith Violation. These notifications are usually sent via:
In-App Notifications:
Check your "Messages" or "Notifications" section. This is typically accessible from the main "Menu" or "Account" tab. Webull often has a "System Messages" or "Alerts" section where such notices appear.
Email:
Webull will also send an email to the registered email address associated with your account. Keep an eye on your inbox (and spam folder, just in case).
Account Statements/Activity:
While not real-time, your monthly or quarterly account statements will typically detail any violations. You can usually access these by navigating to your "Account" section and looking for "Statements," "Documents," or "Activity."
Sub-heading: What the Notification Looks Like
The notification will typically inform you that you've incurred a "Good Faith Violation" and will likely reference the specific trades that led to it. It might also explain the consequence, especially if it's a recurring issue.
Step 4: Understanding the Consequences of GFVs
GFVs aren't the end of the world, but they do carry consequences, especially if they become a pattern.
Sub-heading: First-Time Violations
Often, the first GFV or two might result in a warning. Webull wants you to understand the rules.
Sub-heading: Repeated Violations
If you accumulate three good faith violations within a rolling 12-month period in a cash account, your Webull account will be restricted.
Restriction: This means you will only be able to buy securities if you have sufficient settled cash in your account prior to placing a trade. Essentially, your "Cash Available to Trade" will only reflect truly settled funds, and you won't be able to use unsettled proceeds for immediate new purchases and sales.
Duration: This restriction typically lasts for 90 calendar days.
It's important to keep track of your GFVs to avoid hitting this restriction.
Step 5: How to Avoid Good Faith Violations on Webull (The Golden Rules!)
Now for the most important part: prevention! Avoiding GFVs is simpler than you might think once you understand the core concept of settlement.
Sub-heading: Rule 1: Always Use Settled Funds for New Purchases
This is the most straightforward way. If you sell a stock, wait for the funds to settle (T+1 for most, so usually the next business day) before using those specific proceeds to buy another stock that you intend to sell quickly.
Sub-heading: Rule 2: Wait for Settlement Before Reselling Newly Purchased Securities
If you do use unsettled funds (from a previous sale) to buy a new stock, do not sell that new stock until the funds from the original sale have settled.
Sub-heading: Rule 3: Maintain Sufficient Settled Cash
Always aim to have enough settled cash in your account to cover your trades. This provides a buffer and reduces the likelihood of inadvertently using unsettled funds.
Sub-heading: Rule 4: Be Mindful of Banking Holidays
Banking holidays can affect settlement dates, potentially extending the T+1 period. Always be aware of these when planning your trades, especially around long weekends or public holidays.
Sub-heading: Rule 5: Utilize Webull's Paper Trading
Webull offers a fantastic paper trading feature. Use it! This allows you to practice different trading strategies and get a feel for how funds settle without risking any real money or incurring actual GFVs. It's an invaluable tool for understanding the mechanics.
Sub-heading: Rule 6: Consider a Margin Account (If Appropriate)
If you find yourself frequently hitting GFV limits and you understand the risks involved, a margin account might be a better fit for your trading style. However, do your due diligence and fully understand margin trading before making the switch. Margin accounts come with their own set of rules and risks (like interest on borrowed funds and potential margin calls).
FAQs: Your GFV Questions Answered!
Here are 10 related FAQ questions, all starting with "How to," with quick answers to further empower you:
How to check my "settled cash" balance on Webull?
Webull doesn't always explicitly display a "settled cash" balance, but your "Cash Available to Withdraw" is generally a good indicator of fully settled funds. Your "Cash Available to Trade" might include unsettled funds.
How to tell if my funds have settled on Webull?
Generally, for stocks and options, funds settle on the next business day (T+1) after the trade date. If you sold on Monday, they're typically settled on Tuesday. Deposits via ACH can take 3-4 business days to clear.
How to avoid GFV for options trading on Webull?
Options trading follows the same T+1 settlement rule. If you sell an option and then immediately use those unsettled proceeds to buy another option, and then sell that option before the first sale settles, you'll incur a GFV. The rules are identical to stocks.
How to lift a GFV restriction on Webull?
If your account is restricted due to 3 or more GFVs in 12 months, the restriction typically lasts for 90 calendar days. There's no manual way to "lift" it earlier, you just have to wait it out.
How to contact Webull support for GFV questions?
You can contact Webull customer support directly through the app (usually via the "Menu" or "Account" -> "Help Center" -> "Contact Us" or "Online Service" chat) or by email/phone as listed on their official website.
How to differentiate between GFV and a Day Trade Violation on Webull?
A GFV relates to using unsettled funds for new purchases and then selling that new security before the original funds settle. A Day Trade Violation (PDT rule) applies to margin accounts when you execute four or more "day trades" (buying and selling the same security within the same trading day) in a five-business-day period, with an account equity under $25,000.
How to track my GFV count on Webull?
Webull doesn't provide a public-facing GFV counter within the app. You'll primarily be notified via in-app messages and email. It's recommended to keep a personal log if you're concerned about your GFV count.
How to prevent GFV when depositing new funds into Webull?
When depositing funds via ACH, they may be available for trading almost immediately (instant buying power), but they are not settled for several business days. If you buy a stock with these unsettled deposit funds and then sell it before the deposit fully settles, you can incur a Good Faith Violation. The safest approach is to wait for the deposit to fully settle before trading and immediately selling positions bought with those specific funds.
How to use proceeds from a stock sale without incurring a GFV on Webull?
The safest way is to wait for the proceeds to settle (T+1) before using them to buy another security that you intend to sell quickly. Alternatively, if you have existing settled cash in your account, use that for new purchases.
How to know if a specific trade caused a GFV on Webull?
Webull's GFV notification (via app message or email) will typically specify the trades involved that led to the violation, helping you understand where you went wrong.
By following these steps and understanding the nuances of settled funds, you'll be well-equipped to navigate the world of trading on Webull without the headache of Good Faith Violations. Happy trading!