Introduction
Webull, the popular commission-free trading app, has become a go-to platform for many day traders. However, it’s important to understand the day trading rules set by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) when using Webull for day trading activities. In this article, we’ll discuss the rules and regulations you need to know before you start day trading on Webull in 2023.
What is Day Trading?
Day trading involves buying and selling stocks within the same trading day. Day traders aim to make a profit by taking advantage of small price movements throughout the day. It’s a high-risk, high-reward activity that requires a lot of knowledge and skill.
Webull Day Trading Rules
Pattern Day Trading
Pattern day trading (PDT) is a rule set by FINRA that applies to traders who execute four or more day trades within five business days. If you’re a PDT trader, you must maintain a minimum account balance of $25,000 in your Webull account at all times. If your account falls below this amount, you won’t be able to execute any day trades until you bring your account balance back up to $25,000.
Unsettled Funds
When you sell a stock, the funds from that sale are considered “unsettled” for two business days. This means you can’t use those funds to buy or sell any other stocks until they’re settled. If you try to use unsettled funds to execute a day trade, Webull will flag your account as a PDT account and you’ll be subject to the $25,000 minimum account balance rule.
Free Riding
Free riding is another rule set by FINRA that applies to traders who buy and sell stocks without having enough cash or settled funds in their account to cover the trade. If you engage in free riding on Webull, your account will be flagged and you’ll be restricted from trading for 90 days.
Margin Trading
Webull offers margin trading, which allows you to borrow money from the broker to buy stocks. However, margin trading is a high-risk activity and should only be used by experienced traders who understand the risks involved. If you engage in margin trading on Webull, you’ll be subject to margin call rules, which require you to maintain a minimum account balance to cover any losses you may incur.
Short Selling
Short selling is a strategy that involves selling a stock you don’t own in the hopes of buying it back at a lower price. Webull allows short selling, but you must have a margin account to do so. Short selling is a high-risk strategy and should only be used by experienced traders who understand the risks involved.
Tips for Day Trading on Webull
Do Your Research
Before you start day trading on Webull, make sure you have a solid understanding of the stock market and how it works. Research the companies you’re interested in trading and keep up-to-date with the latest news and trends in the market.
Use Stop-Loss Orders
A stop-loss order is an order to sell a stock if it drops to a certain price. Using stop-loss orders can help you limit your losses and protect your investments.
Don’t Chase Stocks
It’s easy to get caught up in the excitement of day trading and chase after stocks that are rapidly rising. However, this can be a dangerous strategy that often results in losses. Stick to your trading plan and don’t let emotions cloud your judgement.
Start Small
If you’re new to day trading, start with a small account and trade with small amounts of money until you gain more experience and confidence.
Conclusion
Day trading on Webull can be a lucrative activity, but it’s important to understand the rules and regulations set by FINRA and the SEC. Make sure you do your research, use stop-loss orders, and don’t chase after stocks. With the right knowledge and strategy, day trading on Webull can be a profitable and rewarding experience.
