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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.
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What Is Pattern Day Trading and What Are PDT Violations?
Ever heard of pattern day trading (PDT) but aren't sure what it means or what a pattern day trading violation entails?
Keep reading to learn more about pattern day trading and the penalties for PDT violations.
What is pattern day trading?
Pattern day trading refers to a specific type of trading activity that involves frequent trading—specifically, executing at least four day trades (buying and selling the same security on the same day) over five business days, using a margin account.
If these day trades make up more than 6% of the total trades in the account during that period, the trader’s account is flagged as a PDT account by the brokerage overseeing their margin account.
Brokers might have slightly different rules about what constitutes a PDT, so it’s wise to check with your brokerage if you’re unsure about their specific rules.
Some brokers may also label a client as a pattern day trader if they believe the client will engage in PDT based on their trading activities.
According to FINRA rules, to be designated as a pattern day trader, customers must have at least $25,000 in their brokerage account and must be using a margin account.
What are Cash App PDT violation penalties?
Understanding pattern day trading is one thing, but what happens if you violate these rules on Cash App?
Being flagged as a PDT on Cash App isn’t the end of the world. It might just mean that your broker will watch your trading activities more closely. However, you need to be cautious.
If you have less than $25,000 in your account, you might face a “minimum equity call,” requiring you to deposit enough funds to bring your account up to the $25,000 minimum. This can happen even if you didn't intend to become a frequent day trader.
Additionally, if you continue to day trade after being flagged, you might be stopped from opening new positions.
Dealing with these issues can be tricky, especially if you didn’t mean to violate the PDT rules. You might be able to discuss this with your broker to avoid restrictions, but regulatory rules about lifting PDT flags are strict, and removal might only be possible once. Repeat violations can make it very difficult or impossible to remove the flag.
Should I worry about being flagged for PDT if I want to day trade?
If you’re planning to be a day trader, being flagged as a PDT isn't necessarily a bad thing. You can deliberately trade four times or more in five days to ensure your account is flagged, which allows you to continue trading as long as you maintain at least $25,000 in your margin account.
Just ensure you have a good cushion above that $25,000 to accommodate trading using up to four times the amount of your account balance with margin.
If you let your broker know you're a day trader, you can benefit from the increased buying power that comes with a margin account.
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Cash App Day Trading Summary
It’s okay to be flagged for pattern day trading if that's your strategy. Just make sure you always maintain at least $25,000 in your margin account.
If you inadvertently violate PDT rules and aren't interested in being a frequent day trader, reaching out to Cash App may help. First-time violators often have a chance to get the PDT flag removed.
However, remember that pattern day trading can be risky, and it's important to proceed with caution if you decide to engage in it.
Updated on 8/7/2024.
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