For new or inexperienced day traders, Webull is a good place to start. With their simulator platform and zero commission structure, you can learn the ropes of day trade without losing your sleep. You just need to be strategic about the type of account you trade o, whether margin or cash and maintain the required account value to enable day trading
Webull does limit day trades with one exception on their margin account holders. If you’re operating a margin account with a minimum account value of $25,000, you have unlimited access to day trading using both settled and unsettled funds.
Day trading in itself is a complex subject with some shying away from it completely.
To reduce some elements of uncertainty let’s delve into what day trading is and what Webull’s regulations are around it.
What is day trading?
Day trading is buying and selling the same securities within one trading day, aiming to gain from market price fluctuations.
It’s a practice mostly active for the foreign exchange market and the stock market.
Day trading is associated with significant risk and therefore requires a proper strategy, sufficient funds, and knowledge of how the market works.
There are legal regulations around day trading to flag high-risk trading actions or prevent fraudulent trading activities.
How Does Day Trading Work At Webull?
For traders looking to gain some experience on day trading before going into the live environment, Webull has a paper trading simulator where you can use virtual currency to learn and practice how to trade.
There are several types of order types you can use when day trading on the Webull app and a new trader may need to familiarize with them before trading.
The advantage of day trading at Webull is that there are no trading fees and no minimum deposit requirements.
Webull however does not offer direct market access essentially knocking out the more active and sophisticated day trader.
If you’re an ardent day trader and want the freedom to transact day trades at any time, Webull may not be the best option for you.
Webull is better for investors who don’t have much capital and whose day trade strategy is not complex and involves only stocks and options.
You have the option to day trade using either the margin accounts or cash accounts. Webull’s terms and conditions for day trading will depend on which account you’re trading under.
Day Trading On A Margin Account
At Webull, margin account holders have unlimited access to day trading, as long as the account value does not go below $25,000. With this account, you can use both settled and unsettled funds for day trading.
If the account value goes below $25,000 then you’re limited to 3-day trades within 5 consecutive business days.
If you exceed 3 day trades within 5 business days, and your account value is less than $25,000, you will be categorized as a Pattern Day Trader(PDT)
When Do You Get Flagged As A Pattern Day Trader?
A Pattern Day Trader (PDT) is a regulatory designation assigned when trading on a margin account, and you exceed 3-day trades within 5 business days with a net account value being less than $25,000.
You can still trade legally as a PDT, however, the label portrays you as risky and this is to protect other investors from losing capital.
With Webull If you’re labeled a PDT, you need to close the previous trading day with an account value of $25,000 or more. If you don’t then you receive an Equity maintenance(EM) call.
Once you raise your account value to $25,000 the EM call is lifted the following business day.
Does Webull offer leverage for day trading?
Yes, Webull does offer leverage to margin accounts that close the previous trading day with a minimum of $2,000.
The amount of leverage is pegged onto your day trade margin or your overnight margin.
Webull will give you up to 2 times your overnight margin available and up to 4 times your day trade margin available. The more buying power you have on your margin account, the more leverage you can get.
It’s important to note that
- Any trading that has been done before the market opens or after the market closes is taken into account when calculating the number of day trades left.
- It’s not considered a day trade when you selling shares today that you owned the previous day.
- If you set a limit order on a stock purchased on the same day, whether it is actualized or not, it is considered a day trade.
Day Trading On A Cash Account
When using a cash account for day trading, you can only trade with settled funds.
The number of day trades you can transact will depend on how much you have in settled funds and how you distribute those funds against different day trades.
For instance, $3,000 of settled funds can be spread across 3-day trades each worth $1,000 or can be 2-day trades worth $1,500. It all depends on how you want to transact.
Once you’ve used settled funds for day trading, the funds become unsettled funds for two business days. This is important to note because it means you have to wait two business days to sell that position. If you do sell the position while the funds are still unsettled, you attract a Good Faith Violation. Multiple Good Faith Violations can eventually lead to your account being restricted for 90days.
Webull seems to have taken a more preservative approach with their options for day trading.
They do not offer the more complex direct market access trading platform but use a simple one better suited for a novice day trader.
You will only be able to day trade with stocks and options but these are the most traded anyway and their simplicity makes it appealing to inexperienced traders.
Though Webull limits day trades, trading US-listed stocks and options on Webull attracts zero commissions, their fees are low and they have no requirement on a minimum deposit.
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