The rules for day trading or making short sales in a stock account can be hard to decipher, so I have created this handy reference guide.
| Account Type | Day Trading | Short Sales |
| Cash | Yes | No |
| Margin <$2000 | No | No |
| Margin $2000-$25,000 | No | Yes |
| Margin >$25,000 | Yes | Yes |
Note that Robinhood does not allow short sales regardless of your account type or value.
These are United States government rules controlling the activity of US investors. They are not set by the brokerage. The stated purpose behind these rules are to protect small investors from risk and losing their money.
The real reason, in my view, is to protect large corporate investors from competition by keeping small investors small.
Many industries have government imposed barriers, such as licensing (read large money payments to the government) or other barriers enacted into law after lobbying (read bribes to politicians) from entrenched entities seeking to prevent competition. This is done under the guise of some benevolent purpose – such as preventing the small guy from losing their money in the stock market – but which serve to limit competition.
The result is if you want to engage in day trading, and to make money from prices going both up and down, you will need a margin account with at least $25,000 in the account. Otherwise, this money-making privilege is reserved to the already rich and powerful.
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