Hacker News Reader

Comment by smallnamespace | Hacker News Reader

> emotional, irrational day trading among people who can least afford it

This is completely untrue on the face of it:

"Unless you have an equity balance of at least $25,000 in your account, your Robinhood Instant or Robinhood Gold account is limited to no more than three day trades in a sliding five trading day window [emphasis mine]. Exceeding the three day trade limit will restrict your account from placing further day trades for 90 days." [1]

As someone who actually day trades, being able to do 3 trades every 5 days is completely useless.

As an aside, sort of disappointed this is the top-rated comment when the evidence against this claim could be found using ~1 minute of Googling.

[1] https://support.robinhood.com/hc/en-us/articles/217072366-Pa...

View on HN

Did you read the last sentence of that article? "This limit applies to margin accounts (Robinhood Instant and Robinhood Gold), but not to cash accounts."

Also day trading is not a limit on total buys/sells - they're specifically saying it's a limit on buying/selling the same security repeatedly when they are lending you money in a margin account.

Per FINRA rules: Cash accounts are effectively limited to a settlement schedule (at least a day) in which the unsettled funds from one trade cannot be used for another trade. If the unsettled funds are used for another trade, it begins to count toward pattern day trading. Attempting to bypass the pattern day trading limitation with a cash account can also be subject to good faith violations.

So to follow FINRA's rules, Robinhood will limit cash accounts from pattern day trading as well as margin accounts. The rules applied to margin accounts are stricter, but truly day trading in a cash account won't work for long.

You absolutely need to trade on the same security intraday many times in order to generate a profit as a day trader.

Buying a security, then buying a different security, then selling a third security tomorrow -- that's not day trading, that is just the normal flow of equity investing.

Unless you have a lot of money so you can be invested into many different names, you won't be able to do this very many times before you run into the limit, at which point, the rational person will open an account at a different brokerage instead.

The utility of 'zero commission trades' rapidly declines as you have more capital. If you have >$25k to put into a brokerage, paying $1-2 commission per trade (e.g. Interactive Brokers commissions), or even $5-7 per trade (most other retail brokers) is definitely worth the flexibility of being able to change your mind and reversing that trade without the risk of being locked for 90 days.

As for the addendum, sales in cash accounts are settled over several business days and you can't trade on those funds, so again there is no day trading there unless you're very significantly overcapitalized.

Reply on news.ycombinator.com