Does this scenario count as one day trade, or two?

Question

I am currently investing with the Robinhood app and have been doing fairly well with day trades two to three days a week. However, I find myself in a new scenario this morning where I don't know if my actions will be counted as a single day trade, or two day trades.

As you probably already know, a day trade is defined as:

Two transactions in the same instrument in the same trading day, the buying and consequent selling of a stock, for example.

Which also means that selling a stock and then re-buying the same stock also meets these requirements and thus is counted as a day trade.

For example, last night I bought 100 shares of ticker RBZ, and this morning I sold 100 shares of RBZ. This is not currently a day trade since I bought and sold on different days. However, part of my strategy for this ticker is to wait for it to slide 30% down until near market close, and watch for an evening climb.

If it begins rapidly climbing, I plan to buy back in at 100 shares which now, from my understanding, marks my activity today for RBZ as a day trade. After watching it climb a bit more after buying in, I'll want to sell either just before market close, or right as after-hours begins so that I don't lose profit overnight.

At that point, if I sell my position, is it constituted as a second day trade, or mingled in with the first, or just a normal trade?

• Planned Flow for Today:
  • Sell entire position on RBZ.
  • Buy new position on RBZ. <- Constitutes one day trade.
  • Sell entire position on RBZ. <- What is this considered?

My reason for concern is that by the PDT rule, I can only utilize three day trades a week with Robinhood, and I've already used two for the week which means I only have one left. I'm afraid that if I buy back in on RBZ tonight, that I won't be able to sell back out before tomorrow.

Answer 1

A day trade is a round trip in a stock (or option) in a margin account on the same day. You can trade as frequently as you want in a cash account as long as it is with settled cash.

A round trip means you buy to open (long) and sell to close or you sell to open (short) and buy to close. So three transactions in one day (sell, buy, sell) is one day trade.

Note that the Pattern Day Trader rule is slightly more complicated 3 trades in a week. It applies to one who makes four or more day trades within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period. That's a rolling 5 day period not 4 trades in the same calendar week. You don't want to be tripped up by that and end up with a restricted account.