We've all been there – you're excitedly trading on Webull, making what feels like smart moves, when suddenly... poof! You get a notification about a "Good Faith Violation." Your heart sinks. What is it? What did you do wrong? And more importantly, how do you check if you have one on Webull and how do you avoid them in the future?
Don't worry, you're not alone! Good Faith Violations (GFVs) are a common pitfall for new and even experienced traders, especially in cash accounts. Understanding them is crucial for smooth and uninterrupted trading. Let's dive in, step by step, to demystify this often-confusing aspect of trading.
Understanding the "Good Faith Violation" on Webull
Before we jump into checking for a GFV, let's make sure we're on the same page about what it actually is.
A Good Faith Violation occurs in a cash account when you buy a security (like a stock or ETF) with funds that have not yet "settled" from a previous sale, and then you sell that newly purchased security before the original funds have fully settled.
Think of it like this: Imagine you sell a product to your friend, and they promise to pay you tomorrow. You then immediately use the promise of that money to buy something else, and sell that second item before your friend actually pays you. That's essentially a GFV in the trading world.
The key here is "settled funds." When you sell a security, the cash proceeds aren't immediately available for new purchases that you then immediately sell. They go through a settlement period. As of May 28, 2024, most US stock, ETF, and option trades operate on a T+1 settlement cycle, meaning the trade settles one business day after the transaction date. So, if you sell a stock on Monday, the funds from that sale will settle on Tuesday.
Why does this happen?
It's all about avoiding the improper use of unsettled funds. Brokerage firms like Webull are required to follow regulations that prevent "freeriding," where you essentially trade on money you don't actually have in a fully settled state.
Step 1: "Wait, I might have a Good Faith Violation? Tell me how to check!"
Alright, let's get right to it. The first step is always to verify if you've actually incurred a Good Faith Violation on your Webull account. While Webull should notify you, it's always good to know where to look.
Sub-heading 1.1: Webull App Notifications
Check your push notifications: Webull is usually pretty good about sending instant alerts for various account activities, including violations. If you've received a GFV, you'll likely see a push notification on your phone or tablet.
Review your in-app message center: Within the Webull app, navigate to your "Messages" or "Notifications" section. This is typically found by tapping on your profile icon or the "Me" tab. Look for any official communications regarding account restrictions or violations.
Sub-heading 1.2: Account Statements and Activity
Look for account restrictions: If you've incurred multiple GFVs, your account might be restricted. When you try to place a trade, Webull might display a message indicating a restriction or limited buying power.
Review your trade history: Go to your "Trades" or "Orders" history within the Webull app. While it won't explicitly say "Good Faith Violation" next to a specific trade, if you suspect a GFV, carefully examine your recent buys and sells. Look for instances where you sold a stock shortly after buying it with funds that hadn't yet settled from a previous sale. This can be tricky to self-diagnose, but it's a good habit to understand your trade flow.
Check your "Available to Withdraw" balance: This balance often reflects your settled funds. If you've sold something and then immediately bought and sold another security, you might notice your "Available to Withdraw" balance isn't what you expect, as the initial sale proceeds haven't fully settled. This isn't a direct GFV indicator, but it can be a clue.
Sub-heading 1.3: Contact Webull Support (The Surefire Way)
Initiate a chat or call: If you're unsure or can't find a clear notification, the most definitive way to confirm a Good Faith Violation is to contact Webull's customer support directly.
Open the Webull app.
Navigate to "Me" or "Account."
Look for "Customer Service" or "Help Center."
Choose to chat with an agent or find their support phone number.
Clearly state your concern: "I'd like to check if I have any Good Faith Violations on my account and understand the status of my funds."
This is the recommended approach for accurate information.
Step 2: Understanding the Consequences of a Good Faith Violation
So, you've confirmed you have a GFV. Now what? The consequences vary depending on the number of violations you've incurred within a rolling 12-month period.
Sub-heading 2.1: First and Second Violations
Usually a warning: For your first and often second GFV, Webull will typically issue a warning. You'll receive a notification, but your trading ability might not be immediately impacted beyond the specific funds involved in the violation. It's a reminder to be more careful.
Sub-heading 2.2: Third Violation (Within 12 Months) - The 90-Day Restriction
The "Settled Funds Only" Rule: This is where it gets more impactful. If you incur three Good Faith Violations within a rolling 12-month period in a cash account, Webull will impose a 90-day restriction on your account.
What does this mean? For 90 calendar days, you will only be able to buy securities if you have sufficient settled cash in your account prior to placing the trade. This means you can't use unsettled funds at all for new purchases, even if you intend to hold them. You effectively lose the "instant buying power" feature that Webull offers.
This restriction can be quite limiting if you're an active trader, as you'll constantly need to monitor your settled cash balance.
Sub-heading 2.3: More Than Three Violations
While Webull generally highlights the 90-day restriction for three violations, some brokers may have even stricter policies for excessive violations, potentially leading to further limitations or even account closure in extreme cases. Always consult Webull's official terms and conditions or customer support for the most up-to-date and specific policy details.
Step 3: A Step-by-Step Guide to Avoiding Good Faith Violations on Webull
Now that you know how to check and what the consequences are, let's focus on the most important part: preventing them from happening in the first place! This requires a clear understanding of fund settlement and a disciplined approach to your trading.
Sub-heading 3.1: Master the T+1 Settlement Rule
The Golden Rule: The most fundamental concept to grasp is T+1 settlement for stocks, ETFs, and options.
Trade Date (T): The day you execute the buy or sell order.
Settlement Date (T+1): The next business day after the trade date. This is when the ownership of the security and the corresponding cash officially transfer.
What this means for you: When you sell a stock on Monday, the cash from that sale isn't "settled" until Tuesday. You can use those unsettled funds to buy another stock on Monday (Webull often provides "instant buying power"), but if you then sell that new stock on Monday or even early Tuesday before the original sale settles, you've likely triggered a GFV.
Sub-heading 3.2: Always Trade with Settled Funds (The Safest Bet)
The most foolproof method to avoid GFVs is to simply ensure you always have enough settled cash in your account to cover any purchase before you make it.
How to check settled cash: On Webull, look for your "Available to Withdraw" balance. This amount typically represents your fully settled funds. If you buy a stock with money that isn't reflected in your "Available to Withdraw" balance, be extremely cautious about selling it quickly.
Sub-heading 3.3: Plan Your Trades to Respect Settlement Times
Scenario 1: Selling and Reinvesting
You sell Stock A on Monday. The proceeds are unsettled.
You buy Stock B on Monday using the unsettled proceeds from Stock A. This is generally okay.
DO NOT SELL STOCK B on Monday or Tuesday (before Stock A's proceeds settle). Wait until Wednesday (after Stock A's funds settle on Tuesday) to sell Stock B if you bought it with unsettled funds from Stock A.
Scenario 2: Using Freshly Deposited Funds
You deposit funds into your Webull account. These funds need to clear your bank and settle with Webull. This can take a few business days.
Wait for the deposited funds to show as "settled" or "available to withdraw" before using them for a purchase you might quickly sell. If Webull gives you instant buying power on a fresh deposit, be mindful that these funds are technically unsettled until they clear your bank.
Sub-heading 3.4: Understand "Instant Buying Power"
Webull often provides "instant buying power" for funds from recent sales or deposits. This is a convenience, but it does not mean the funds are settled. It means Webull is fronting you the money, expecting the underlying funds to settle in due course.
The rule of thumb: You can use instant buying power to open a new position, but you cannot close that new position before the funds that were used to purchase it have settled.
Sub-heading 3.5: Utilize Your Webull Account Information
Check your cash balance details: Webull's account details often break down your cash balance into "settled cash" and "unsettled funds." Pay close attention to these figures.
Look for warning messages: Webull's platform is designed to help you avoid violations. If you're about to make a trade that could lead to a GFV, you might see a pop-up warning. Do not ignore these!
Step 4: What to Do If You Get a Good Faith Violation
Mistakes happen. If you find yourself with a GFV, here's what to do:
Sub-heading 4.1: Don't Panic!
A single GFV (or even two) isn't the end of the world. It's a learning experience.
Sub-heading 4.2: Understand the Specifics
Review the violation details Webull provides. Which trade triggered it? Why? This will help you learn from the mistake.
Sub-heading 4.3: Adjust Your Trading Strategy
If you've incurred a GFV, take a moment to rethink your trading habits.
Are you day trading too aggressively in a cash account?
Are you consistently selling positions before the underlying funds settle?
Consider waiting longer between trades, especially if you're using proceeds from a recent sale.
Sub-heading 4.4: Fund Your Account Proactively
To avoid future GFVs, ensure you have sufficient settled cash in your account. If you plan to be an active trader, having a healthy cash buffer can prevent these issues.
Sub-heading 4.5: Consider a Margin Account (with caution)
Warning: This is not a blanket recommendation for everyone. Margin accounts allow you to borrow money from your broker to trade, and they handle settlement differently, which can reduce the likelihood of GFVs. However, margin trading comes with significantly higher risks, including the potential to lose more money than you invested, margin calls, and interest on borrowed funds.
Only consider a margin account if you fully understand the risks and have substantial trading experience. For most beginners, sticking to a cash account and understanding GFV rules is the safer option.
10 Related FAQ Questions (How To...)
Here are some common questions about Good Faith Violations on Webull, with quick answers:
How to understand settled vs. unsettled funds on Webull?
Settled funds are cash that has fully cleared and is available for withdrawal or new purchases that you can immediately sell. Unsettled funds are proceeds from a recent sale that are still in the T+1 settlement period.
How to check my settled cash balance on Webull?
Look for your "Available to Withdraw" balance in your Webull account. This typically reflects your settled funds.
How to avoid a good faith violation if I want to reinvest quickly?
Wait until the funds from your initial sale have settled (T+1 business day) before selling any new position purchased with those funds.
How to know if Webull has given me a Good Faith Violation?
Webull will usually send you a notification (push or in-app message) if you incur a GFV. You can also contact their customer support to confirm.
How to check the settlement date for a recent trade on Webull?
While Webull might not explicitly show "settlement date" for every transaction in your history, remember that most stock/ETF/option trades settle T+1. So, if you traded Monday, it settles Tuesday.
How to lift a 90-day restriction on Webull due to GFVs?
The 90-day restriction is typically a fixed period. You must simply wait for the 90 days to pass. After that, your account will return to normal, but be mindful of your trading to avoid another restriction.
How to differentiate a Good Faith Violation from a Free Ride Violation?
A Good Faith Violation occurs when you buy with unsettled funds and then sell that new security before the initial funds settle. A Free Ride Violation occurs when you buy a security without sufficient settled funds and then sell that security without ever paying for it in full with settled funds. They are related but distinct.
How to avoid multiple Good Faith Violations on Webull?
Always prioritize using settled funds for purchases. If you use unsettled funds to buy, commit to holding that new position until the original funds settle.
How to contact Webull support for GFV inquiries?
Go to the "Me" or "Account" section in your Webull app, then look for "Customer Service" or "Help Center" to initiate a chat or find their contact number.
How to learn more about trading regulations like GFVs?
Educate yourself through Webull's help center, FINRA's website, or other reputable financial education resources. Understanding the rules is key to avoiding violations.