Unmasking the Mystery: How to Know if You Have a Good Faith Violation on Webull
Are you an active trader on Webull, making the most of every market swing? Do you often find yourself buying and selling within a short timeframe, aiming to capitalize on quick profits? If so, you've landed on the right page! One crucial aspect of navigating the world of online trading, especially in a cash account, is understanding and avoiding something called a Good Faith Violation (GFV). It might sound intimidating, but trust me, with a little knowledge, you can steer clear of these potential pitfalls and keep your trading journey smooth.
So, let's dive in! Have you ever sold a stock only to immediately use those funds to buy another, perhaps even selling that second stock quickly? If your answer is "yes," then you're already encountering the core concept behind a GFV. It's not necessarily a problem, but it's how you manage those funds and their "settlement" that determines if you're violating rules.
Step 1: Understanding the Core Concept: What Exactly is a Good Faith Violation (GFV)?
Before we can identify if you have one, you need to grasp what a GFV truly means. In simplest terms, a Good Faith Violation occurs in a cash account when you sell a security that was purchased with "unsettled funds," and then you sell that newly purchased security before the original funds used to buy it have fully "settled."
Think of it like this:
You sell Stock A. The money from this sale isn't immediately "real" cash in your account for new purchases. It takes a little time to clear.
The brokerage, in "good faith," might let you use those pending funds to buy Stock B right away.
The violation happens if you then sell Stock B before the money from your initial sale of Stock A has actually settled.
Why is it called "good faith"? Because your broker essentially extends credit to you, assuming you'll have the settled funds to cover your purchases. If you then sell the asset bought with those unsettled funds before they actually clear, you're breaking that "good faith" agreement.
Settlement Periods: The T+1 Rule
For US stocks, ETFs, and options, the standard settlement period is T+1. This means the transaction officially completes on the trade date plus one business day.
If you sell a stock on Monday (T), the funds from that sale will officially settle on Tuesday (T+1).
Even though the cash appears in your "available to trade" balance almost instantly, it's not "settled cash" for new purchases until T+1.
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| How Do I Know If I Have A Good Faith Violation On Webull |
Step 2: How Good Faith Violations Happen on Webull (Common Scenarios)
Let's break down some typical scenarios where a GFV might occur on Webull:
Scenario 1: The Quick Flip with Unsettled Funds
Monday Morning: You have $0 in settled cash in your Webull cash account.
Monday Morning: You sell Stock X for $1,000. The proceeds from this sale are unsettled.
Monday Afternoon: You immediately use the $1,000 (which is now in your "available to trade" balance but still unsettled) to buy Stock Y.
Before Tuesday (the settlement day for Stock X's sale): You sell Stock Y.
Result: This is a Good Faith Violation. You sold Stock Y, which you essentially bought with money that hadn't fully cleared from the sale of Stock X.
QuickTip: Revisit key lines for better recall.
Scenario 2: Mixing Settled and Unsettled Funds
Monday Morning: You have $500 in settled cash in your Webull account.
Monday Morning: You sell Stock A for $1,000. Now you have $500 settled + $1,000 unsettled. Your "available to trade" might show $1,500.
Monday Afternoon: You buy Stock B for $1,200. This purchase uses your $500 settled cash and $700 of the unsettled cash from the Stock A sale.
Before Tuesday (the settlement day for Stock A's sale): You sell Stock B.
Result: This is a Good Faith Violation. Even though you used some settled cash, a portion of Stock B was bought with unsettled funds, and you sold it before those funds settled.
Key Takeaway: It's about selling what you bought with unsettled funds, before those initial funds settle.
Step 3: Checking for Good Faith Violations on Webull
While Webull does a good job of trying to warn you before you execute a trade that might lead to a GFV, you might still incur one. The best way to check is to keep a close eye on your account statements and any notifications from Webull.
Sub-heading: Webull's Warning System
Trade Preview Screen: Before you confirm a buy order, especially if you're using recently sold funds, Webull often displays a warning message. It might state something like, "This trade may result in a Good Faith Violation if you sell this position before the funds settle." Pay close attention to these warnings! They are your first line of defense.
Sub-heading: Reviewing Your Account Statements and Activity
Log in to Your Webull Account: Access your account either through the mobile app or the desktop platform.
Navigate to "Account" or "Portfolio": Look for a section that displays your account details, statements, or trading history.
Check for "Violations" or "Restrictions": Webull typically has a dedicated section for any account restrictions or violations. This might be under "Account Features," "Brokerage & Trading," or "Trade Restrictions & Violations."
Review Your Trade Confirmations: Each trade you make generates a confirmation. While these won't explicitly state "GFV," understanding the settlement dates (T+1) for your sales will help you track if you're selling new purchases before those funds clear.
Monitor Your "Settled Cash" Balance: Webull displays various cash balances. The crucial one to watch for GFV purposes is your "Settled Cash" or "Cash Available for Withdrawal." This is the money that has fully cleared and can be used for new purchases without GFV risk, or withdrawn.
Pro Tip: Always prioritize trading with your "Settled Cash" balance to avoid GFVs altogether.
Step 4: The Consequences of Good Faith Violations on Webull
It's important to know that a single GFV isn't the end of the world. However, accumulating multiple violations within a rolling 12-month period can lead to significant account restrictions.
Tip: Use the structure of the text to guide you.
Sub-heading: Understanding the GFV Tally
GFV 1-3: These are recorded. You'll likely receive warnings from Webull, but your trading ability won't be immediately restricted. Think of them as yellow cards.
GFV 4: Upon receiving your fourth GFV within a rolling 12-month period, your cash account will be restricted to "settled funds only." This means you can only place buy orders if you have sufficient settled cash in your account before placing the trade. This restriction is usually effective for a 12-month rolling period from when the first GFV was incurred. This is a significant impact on your trading flexibility.
GFV 5: If you incur a fifth GFV within that rolling 12-month period, your cash account will be restricted to "sell only" for 90 days. This is the most severe restriction, meaning you can only sell existing positions and cannot open any new ones. This is a clearing house restriction, and Webull cannot remove it.
Important Note: These restrictions are industry-standard and mandated by regulatory bodies to prevent "free riding" and ensure proper fund management.
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Step 5: How to Avoid Good Faith Violations on Webull
Prevention is always better than cure! Here are the best practices to ensure you don't incur a GFV:
Sub-heading: Always Prioritize Settled Funds
Check Your "Settled Cash" Balance: Before making any new purchases, always look at your "Settled Cash" balance. This is the amount you can truly use without GFV risk.
Wait for Settlement: If you've just sold a security, wait until the funds from that sale have fully settled (T+1) before using those proceeds for a new purchase. This is the most straightforward and effective way to avoid GFVs.
Sub-heading: Fund Your Account Proactively
Deposit Funds: If you plan on active trading, ensure you have sufficient funds in your account before you start trading. A healthy cash buffer can prevent you from inadvertently using unsettled funds.
Instant Deposits: While Webull might offer instant deposits, remember that these funds also need to settle with the bank before they are truly "settled cash" in your brokerage account. Avoid quick sell-buy-sell cycles if you're relying on newly deposited funds.
Sub-heading: Utilize Margin Accounts (with caution)
Margin Accounts: If you frequently engage in rapid trading and understand the risks, consider converting your cash account to a margin account. Margin accounts allow you to trade with borrowed funds, and generally, the "good faith violation" rules are less stringent, as you have a line of credit. However, be extremely aware of margin requirements, interest rates, and the amplified risks involved. This is not a blanket recommendation for everyone.
Sub-heading: Understand Your Trading Strategy
Day Trading vs. Swing Trading: If you're a day trader, continuously buying and selling within the same day, you're at higher risk of GFVs in a cash account. Consider how your strategy aligns with cash account rules.
Long-Term Holds: If you're buying stocks for longer-term holds, GFVs are much less likely to be an issue, as you won't be selling positions quickly that were bought with unsettled funds.
Step 6: What to Do if You Incur a Good Faith Violation
Reminder: Revisit older posts — they stay useful.
Don't panic! It happens. Here's what you should do:
Acknowledge and Learn: Understand why the GFV occurred. Use it as a learning opportunity to adjust your trading habits.
Check Your Violation Count: Webull will notify you. Keep track of how many GFVs you've accumulated within the rolling 12-month period.
Adjust Your Trading: If you're approaching the 4th or 5th GFV, significantly adjust your trading strategy to only use settled funds.
Contact Webull Support (if needed): If you're unsure about a violation or have questions about your account status, reach out to Webull's customer support. While they cannot remove regulatory restrictions, they can clarify the rules and your account status. There is generally no "appeal" process for GFVs themselves, as they are a direct consequence of your trading activity based on established regulations.
Frequently Asked Questions (FAQs)
How to avoid a good faith violation by checking my settled cash balance?
You can typically find your "Settled Cash" balance displayed prominently on your Webull account dashboard or within the "Account" or "Portfolio" section. Always ensure your desired purchase amount is less than or equal to this settled cash balance before placing a trade.
How to resolve a good faith violation on Webull if I've already incurred one?
Once a good faith violation is incurred, it's recorded. There's no specific action to "resolve" an individual GFV other than to ensure you don't incur more. The key is to prevent future violations by waiting for funds to settle before making new purchases.
How to know when funds from a sale will settle on Webull?
For US stocks, ETFs, and options, funds settle on a T+1 basis. So, if you sell on Monday, the funds will settle on Tuesday. Webull's platform may also indicate the settlement date for recent sales.
How to upgrade my Webull account to a margin account to potentially reduce GFV risk?
You can typically initiate an account type conversion (from cash to margin) within your Webull account settings. Be aware that margin accounts have specific eligibility requirements, and you'll need to understand margin rules and risks thoroughly before converting.
Tip: Look for small cues in wording.
How to track the number of good faith violations I have on Webull?
Webull generally notifies you when a GFV occurs. While there might not be a prominent "GFV counter" on the main screen, you can often find details about account restrictions and violations within your account features or notifications section. Keep an eye on any emails or in-app messages from Webull regarding violations.
How to differentiate between "available to trade" and "settled cash" on Webull?
"Available to trade" often includes both settled and unsettled funds, and even proceeds from recent sales that haven't officially settled yet. "Settled Cash" specifically refers to funds that have fully cleared and are available for unrestricted use or withdrawal without incurring a GFV. Always prioritize "Settled Cash" for new purchases.
How to ensure my deposit has settled before trading on Webull?
Bank transfers (ACH deposits) typically take a few business days to fully settle. While Webull might give you instant buying power for some deposits, those funds are still unsettled until they fully clear from your bank. It's best to wait until the deposit shows as "settled cash" in your account before engaging in rapid trading with those funds.
How to avoid good faith violations if I'm a day trader on Webull?
If you're a day trader, a margin account is generally more suitable as it provides immediate access to funds from sales for reinvestment (subject to PDT rules if applicable). In a cash account, day traders must be extremely diligent about waiting for T+1 settlement or ensuring they have enough settled cash for each new purchase.
How to contact Webull support regarding a good faith violation?
You can typically contact Webull support through their in-app chat, email, or phone number found on their official website. Explain your situation clearly and ask for clarification on any GFV you've received or your account status.
How to prevent my Webull account from being restricted due to good faith violations?
The most effective way is to strictly adhere to using settled cash for all new purchases. If you sell a stock, wait until the next business day for those funds to settle before using them to buy another stock. If you're consistently running into GFVs, re-evaluate your trading strategy and consider whether a cash account truly suits your trading style.
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