What Happens If I Make 4 Day Trades? Understanding Pattern Day Trading Rules

So you’ve been trading stocks and wondering what happens if you make 4 day trades? I’ve been there and let me tell you – it’s crucial to understand the consequences before you hit that fourth trade button. Pattern day trading rules can significantly impact your trading activities especially if you’re using a margin account.

The Pattern Day Trading (PDT) Rule Explained

When you make 4 day trades within 5 trading days, and these day trades represent more than 6% of your total trades in that same period, your account gets flagged as a pattern day trader. This rule comes from FINRA (Financial Industry Regulatory Authority), and every brokerage, including Robinhood, must enforce it.

What Exactly Is a Day Trade?

Before going further, let’s clarify what counts as a day trade:

• Buying and selling the same stock or exchange-traded product (ETP) within a single trading day
• Opening and closing the same options contracts within a single trading day

Remember, the trading day ends at 8 PM ET. Trades made during overnight trading hours (between 8 PM-12 AM ET) will count toward the next trading day.

Immediate Consequences of Making 4 Day Trades

When you hit that 4th day trade within the 5-trading-day window, here’s what happens:

1. Your account gets flagged as a pattern day trader
2. You’ll need $25,000 minimum equity in your portfolio to continue day trading
3. If your account falls below $25,000, you can’t place any NEW day trades until you either:
   • Increase your portfolio value above $25,000
   • Use your one-time courtesy PDT flag removal (if available)
   • Switch to a cash account

If you continue day trading while flagged without meeting the $25,000 requirement, your account may be restricted to “position closing only.” This means you can only sell positions you already own but can’t open new ones.

Important Exception: Cash Accounts

Here’s the good news – pattern day trading restrictions don’t apply to cash accounts! They only apply to margin accounts. So if you’re using a cash account, you can make as many day trades as you want without worrying about PDT rules.

However, there’s a catch with cash accounts you can’t trade with unsettled funds from stock ETP, and option sales. After you sell you need to wait for the funds to settle (typically T+2, or two trading days) before using that money again.

How Robinhood Tracks Your Day Trades

Robinhood provides a helpful “Day trade counter” feature that shows you how many day trades you’ve made in the current 5-trading-day period. To check it:

1. Select Account → Menu (3 bars) or Settings
2. Select Investing → Day trades

This helps you keep track and avoid accidentally triggering the PDT flag.

Pattern Day Trade Protection

Robinhood has also implemented “Pattern Day Trade Protection” which alerts you when you’re about to place your 4th day trade. This feature gives you the option to:

• Proceed with the 4th trade (and get flagged as a PDT)
• Cancel the trade to avoid the PDT designation

I strongly recommend enabling this feature if you’re actively trading on Robinhood

Real-World Examples of What Counts as Day Trades

Let’s look at some examples to clarify what triggers day trade counts:

Example 1: Simple Buy and Sell

Starting with zero shares of ABC stock:

• Buy 1 ABC
• Sell 1 ABC

This counts as 1 day trade because you bought and sold ABC on the same day.

Example 2: Multiple Buys and Sells

Starting with zero shares of ABC stock:

• Buy 1 ABC
• Buy 2 ABC
• Buy 7 ABC
• Sell 1 ABC
• Sell 5 ABC
• Sell 4 ABC

This still counts as just 1 day trade because there’s only one change in direction between buys and sells.

Example 3: Two Separate Day Trades

Starting with zero shares of ABC:

• Buy 50 ABC
• Sell 15 ABC
• Sell 35 ABC
• Buy 10 ABC
• Sell 10 ABC

This counts as 2 day trades because there are 2 changes in direction from buys to sells.

Options for Dealing with a PDT Flag

If you’ve been flagged as a pattern day trader and don’t have $25,000, you have several options:

1. Use Your One-Time Flag Removal

Robinhood offers a one-time courtesy removal of your PDT flag. This is a valuable “get out of jail free” card, so use it wisely! After using it, you won’t receive another one.

2. Switch to a Cash Account

Since PDT rules don’t apply to cash accounts, switching to a cash account will let you continue day trading without the $25,000 requirement. However, remember the trade-off: you’ll need to wait for funds to settle after selling before using them again.

3. Wait 90 Days

If you don’t take any action, the PDT restriction typically lasts for 90 days.

4. Deposit Funds to Reach $25,000

If you’re serious about day trading, bringing your account balance to $25,000 will allow you to continue even with the PDT flag.

How PDT Affects Other Robinhood Features

Being flagged for PDT impacts other Robinhood features too:

Brokerage Cash Sweep Program

If you’re flagged as a PDT, you can still sign up for the brokerage cash sweep program, but you won’t earn interest while in a margin account. If you’re already enrolled when flagged, your cash will be swept back from program banks.

Stock Lending Program

PDT-flagged accounts are ineligible to participate in Stock Lending while in a margin account, regardless of portfolio value. Any stocks you’ve loaned will be returned to your account.

Multiple Accounts and PDT

If you’ve got multiple investing accounts with Robinhood, be aware that PDT rules apply at the user level. If one margin account gets flagged for PDT and you switch it to cash, then switch another account to margin, the PDT flag will carry over to the new margin account.

Additionally, the one-time removal of a PDT flag applies at the user level regardless of how many individual investing accounts you have.

Some Common Misconceptions About Day Trading

I’ve noticed several misconceptions about day trading that are worth clearing up:

Misconception #1: “I can just open a new account to avoid PDT”

Reality: PDT flags follow you at the user level, not just the account level.

Misconception #2: “I’ll just be careful and not make 4 trades”

Reality: It’s easier to hit 4 day trades than you think, especially with partial executions on low-volume stocks or large orders.

Misconception #3: “The 5-day period is always Monday-Friday”

Reality: The 5 trading day window doesn’t necessarily align with the calendar week. It could be any 5 consecutive trading days (e.g., Wednesday through Tuesday).

My Personal Experience and Recommendations

I remember when I first started trading and hit that 4th day trade without realizing the consequences. It was frustrating to suddenly find myself unable to make the trades I wanted.

Based on my experience, here’s what I recommend:

1. Always enable Pattern Day Trade Protection – This has saved me multiple times from accidentally triggering the PDT flag
2. Consider using a cash account for active trading if you don’t have $25,000 – Yes, you’ll deal with settlement periods, but it beats being locked out of day trading
3. Keep track of your day trades religiously – Check your counter before making any trades
4. Save your one-time PDT removal for when you really need it – It’s tempting to use it right away, but you might need it more later

Making 4 day trades within 5 trading days will flag your account as a pattern day trader, requiring you to maintain at least $25,000 in your account to continue day trading. Without that amount, your trading activities will be restricted.

If you’re an active trader who doesn’t have $25,000 to meet the requirement, consider switching to a cash account to avoid PDT rules altogether. Just remember to factor in settlement times for your trading strategy.

Remember that these rules aren’t arbitrary – they’re designed by regulators to protect retail investors from the risks associated with frequent trading. While they may seem restrictive, they serve an important purpose in the broader market ecosystem.

Have you ever been flagged as a pattern day trader? What did you do to address it? I’d love to hear about your experiences in the comments below!

Yes, you can make 4 day trades on Robinhood, but you must follow the Pattern Day Trading (PDT) rule. If you have a margin account with less than

$\$25,000$

in equity, this will flag you as a pattern day trader, which has specific consequences.