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Theta_Ome t1_jaeinia wrote

Reply to comment by Daymanic in Webull policy update regarding Pattern Day Trading. by Present_School_8754

You really can’t, they call it a good faith violation and if you read the terms of service it’s grounds for terminating your account if it’s a regular occurrence. While you can technically enter a position if it’s a situation where you plan to deposit money, you could get away with it. But selling instead of depositing funds is a secondary violation. These are banking laws, not broker laws.

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Daymanic t1_jaerg3e wrote

Well you’re wrong, it’s right in the first sentence. But I’ll give you benefit of the doubt because I wracked my brain over it for the first few months of day trading.

Good faith violation What is it? A good faith violation occurs when you buy a security and sell it before paying for the initial purchase in full with settled funds.

https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations

Consequences: If you incur 3 good faith violations in a 12-month period in a cash account, your brokerage firm will restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade. This restriction will be effective for 90 calendar days.

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Theta_Ome t1_jaesl6o wrote

I have been using a cash account to day trade equities since 2016, before free commission. I'm not going to take this conversation personally because I know how complicated it is to get your head wrapped around GFVs.

Buying the security without having settled funds is a good faith violation.And per your own link - if you sell that position before you have deposited funds to cover that settlement, as in, if you attempt to simply sell the position and let that pay for the original purchase- you have a freeriding violation.

You cannot regularly commit GFVs in a cash account. You made it seem like you can but you can't, even if you hold it overnight - you have to deposit cash and let it settle to cover that initial purchase. These are not broker specific rules, these are banking regulations. It's basic accounting.

This might have a bit of leeway if you're trading cash-settled option. My experience is in equities.As you pointed out, 3 GFVs in a year and your account is restricted at a minimum. But many brokers will simply close your account - mostly because it shows you don't know what youre doing and youre making a mess of their books, making regulators look at them, etc.

Edit: TL;DR If you buy a position with unsettled funds, that is a good faith violation whether you hold it overnight or not. The purchase is a violation. Selling the position before you have added money to cover that settlement is another violation. You cannot do this regularly, as you implied.

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