Cash App Day Trading

Cash App Day Trading Rules (2024)

Pattern day trading rules at Cash App. Active trader PDT requirements and limits for margin and cash accounts above/below $25,000 balance. How many day trades does Cash App allow.

What Is Pattern Day Trading and What Are PDT Violations?

Have you ever heard the term pattern day trading (PDT) but you’re not sure what it is? Maybe you’re wondering about what it means to receive a pattern day trading violation?

Either way, you’ve come to the right place! Read on to learn more about pattern day trading and pattern day trading violation penalties.

What is pattern day trading?

Pattern day trading (PDT) refers to a specific type of trading activity. First of all, it involves frequent trading, meaning at least four day trades over the span of five business days. (A day trade is what it sounds like, i.e. buying and selling the same security in the same day.) Second of all, it involves the use of a margin account.

If the number of day trades equates to more than 6% of the total trade activity occurring in the margin account during that five-day period, then the trader’s account will be flagged for PDT by the broker who oversees their margin account.

These criteria form a minimum requirement, and certain brokers may hold slightly different definitions of what constitutes PDT. If you’re unsure about the policies of your broker, it’s not a bad idea to contact them so you know what will be considered as PDT.

Cash App can also label a client a pattern day trader if they have “a reasonable basis to believe” that this customer will engage in PDT.

Following FINRA rules, customers must possess at least $25,000 in their Cash App account and only use margin accounts to be designated pattern day traders.

What are Cash App PDT violation penalties?

Now that you’re familiar with pattern day trading (PDT), let’s move on to Cash App PDT violation penalties.

If your account becomes labeled for PDT by Cash App, it isn’t necessarily a big deal. Depending on your broker, it’s simply a way to keep a closer eye on your activities. With the flag, they’ll be more likely to register consistent or repeat offenses. What this means for you, however, is that you should proceed very carefully.

Things may be significantly worse, however, if you have less than $25,000 in the margin account you used for your PDT. Why? Some brokers might hit you with a “minimum equity call,” which means that you would have to deposit funds into your account until it reaches the $25,000 minimum. This could occur even if you didn’t plan on being a regular day trader.

Plus, if you make an additional day trade once your account has been flagged, you might be unable to open new positions.

All in all, this is a huge hassle, especially if you didn’t even intend to day trade or violate the PDT rules. You may be able to contact your broker and make your case to avoid trading restrictions. However, regulatory rules on the flagging of PDT and removal of PDT flags are rather narrow. You might be able to get the flag removed once. If you are a repeat offender, however, it will be difficult or even impossible to get the PDT flag removed.

Should I worry about being flagged for PDT if I want to day trade?

No, not necessarily. If you want to commit to day trading, you can day trade four times or more in five days on purpose so that your account will get flagged for PDT. This will allow you to keep day trading without any issues, so long as you hold at least $25,000 in your margin account at all times.

Since that $25,000 number is essential, however, you probably don’t want to mess with day trading unless you have a solid cushion over that.

Since you can benefit from a buying power up to four times your account balance with a margin account, many day traders want to be labeled as such. You can also simply contact your broker and inform them that you’re a day trader.

Better Broker For Traders

For active traders, a good alternative brokerage company is Webull. It has a number of advantages over Cash App: margin trading, virtual and crypto trading, and advanced trading tools.

Webull Promotion

Open Webull Account

Cash App Day Trading Wrapping up

In short, it’s fine to have your account flagged for pattern day trading (PDT) if you’re a day trader. Just understand that you absolutely must hold at least $25,000 in your margin account at all times.

If you’re not interested in day trading, however, and you accidentally violate the PDT rules, you may want to contact Cash App. If you’re a first-time offender, you have a decent chance at getting the PDT flag removed.

PDT can result in heavy losses, so traders should proceed with caution if they want to engage in PDT.