Understanding Robinhood’s Three-Trade Limit and How It Affects TradersPost

‍How the Robinhood Three-Trade Limit Works

Robinhood enforces the Pattern Day Trader (PDT) rule, which restricts accounts with less than $25,000 in equity from making more than three day trades within a five-business-day period. A day trade is defined as buying and selling the same security on the same day.

If you exceed this limit, Robinhood may flag your account as a pattern day trader, potentially restricting your ability to trade.

Can Setting a Fixed Position Size Avoid the Limit?

Some traders consider setting each trade to 34% of their portfolio to ensure they never hold more than three positions at once. However, this approach does not prevent violations of the PDT rule.

For example, if you enter three trades at 33% of your portfolio each and exit them all before noon, you have used up your three allowed day trades. If another trade signal appears in the afternoon and you enter and exit another position, you will exceed the limit and trigger PDT restrictions.

How to Avoid Pattern Day Trader Violations

To ensure compliance with Robinhood’s trading limits, traders should:

• Limit their strategy to one trade per day using Pine Script or TradingView settings.

• Hold positions overnight instead of closing them the same day. The PDT rule only applies to same-day round-trip trades.

• Use a cash account instead of a margin account. However, cash accounts require settlement time (typically two to three days) before reinvesting funds.

Conclusion

Simply setting a fixed position size will not prevent violations of Robinhood’s three-trade limit if multiple round-trip trades occur within the same day. Traders should adjust their strategy logic to restrict same-day trades or consider switching to a cash account to avoid PDT limitations.