Quick question everyone,
Working on a daily rebalancing algo. Because it trades daily, I was planning on hooking up Robinhood. However, I've heard that Robinhood holds money for three (3) days before it clears for the next trade. Is this true for algos trading from Quantopian through Robinhood? If so, do you guys think it will affect my algo? Really appreciate any help. [Can't attach the algo because it's proprietary, sorry]
yes it will affect your algo. The reason they hold the money is because you don't have a margin account and it takes firms (all firms) 3 days to clear trades. If you had a margin account they could lend you money against the soon to be cleared closed position.
also, make sure you are aware of pattern day trading rules as well if the account size is under 25K. (i believe thats the cutoff)
maybe you could rebalance weekly and see how the results look?
Robinhood doesn't offer margin accounts, all accounts are cash accounts and therefore you will need to wait three days for the trade to clear. This will absolutely affect your algorithm, because if you want to trade $1,000 per day every day, you will need to maintain $4,000 cash in your account.
Also, pattern day trading rules to not apply to cash accounts, only margin accounts.
@Michael Perry
Thanks. I see where $4,000 would be ideal and leave the algo running smoothly. Do you think there is a way to leave 500 in cash reserves on the Robinhood account and keep 500 invested each day? I only ask as my general rule of thumb is never to put more than 1,000 in a new algo for first week, and squandering 4,000 (and later multiples of that) if I missed a bug worries me.
Or would I need to do 250 with 750 reserve, which seems far too low to do any real trading.
Hi Nate,
I was just using $1,000 as an example - the point is that if you want your algo to trade every day, then you need to keep four times your daily selling volume in your account at a time. So if you want to trade $100,000 per day then you need to have $400,000 in your account, if you only want to put $1,000 in your account, then you can trade $250 a day.
Luckily, Robinhood is supposedly coming out with margin accounts soon!
Hope that helps!
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