How to Turn Off Margin on Robinhood

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If you‘re a Robinhood user, you may be wondering how to disable margin trading and convert your account to cash-only mode. Well, you‘ve come to the right place!

In this comprehensive guide, we‘ll cover everything you need to know about turning off margin capabilities on Robinhood and switching to a cash account. I‘ll provide detailed steps, screenshots, tips from my own experience as an active trader, and even some alternatives if you decide keeping margin is right for your investing needs after all.

By the end, you’ll have an in-depth understanding of how to convert your Robinhood account from margin to cash, the differences between account types, and pros and cons of trading with (or without!) access to margin loans.

Let‘s get started!

What Exactly is Margin Trading?

Before we dive into the step-by-step process for disabling margin, let’s quickly cover the basics of what margin trading actually is.

When you trade stocks or options using borrowed funds provided by your broker, this is called “trading on margin” or “margin trading."

Robinhood allows users to borrow money from them to buy more securities than their cash balance could otherwise allow. This gives you increased “buying power” since you’re not limited to just the existing cash in your account.

For example, let’s say you have $1,000 cash available in your Robinhood account. Robinhood may let you borrow up to an additional $1,000, giving you $2,000 total in buying power thanks to margin.

So you could buy $2,000 worth of stock when you‘ve only contributed $1,000 yourself. The other $1,000 is borrowed from Robinhood Securites.

Now, Robinhood charges interest on the amount you borrow via margin. The current margin rate is around 8% for most users, though this can vary over time.

You also have to maintain a minimum equity balance relative to your total margin loan amount, called the “maintenance margin.” If your equity dips too low, Robinhood can issue a “margin call” requiring you to deposit more funds.

There are a few key advantages that trading on margin provides:

  • Increased buying power
  • Ability to short sell
  • Potentially higher returns through leverage

But there are also major risks to consider:

  • Interest costs eat into net profits
  • Risk of margin calls and forced liquidations
  • Increased losses from leverage magnifying downside

So while margin trading does offer some benefits for certain investors, it definitely carries additional risks and complexities. It‘s not necessarily right for everyone, especially beginning traders.

Now that you have a basic idea of how margin works, let’s walk through the process of disabling it on Robinhood…

Step-by-Step: How to Turn Off Margin on Robinhood

The steps to convert your Robinhood margin account to cash-only are quick and easy. Here’s what to do:

1. Tap the Account Icon

Open up the Robinhood mobile app on your iPhone or Android device. On the bottom right, tap the icon that shows your initials or profile picture. This brings up your account menu.

Robinhood Account Icon

2. Tap Settings

From the account menu, tap on the gear "Settings" icon to open your account settings.

Robinhood Settings

3. Select Investing

In your Settings menu, tap on "Investing" to access the investing-related account settings.

Robinhood Investing Settings

4. Toggle Off Instant Settlement

Under the "Day Trade Settings" section, tap on the switch next to "Instant Settlement" to disable this feature.

With instant settlements enabled, cash from trades becomes available immediately to use for new buys. Turning this off requires standard T+2 settlement times for cash trades per SEC regulations.

Toggle off instant settlement

And that‘s it! Toggling off instant settlements will convert your margin account to a cash account within a few trading days.

It doesn‘t happen instantly, so you may still see warnings about margin for a couple days until the change fully processes in Robinhood‘s systems. But after 2-3 trading sessions your account will be switched to cash-only mode.

Okay, we’ve covered the quick process for disabling margin. But it’s also important to understand the key differences between margin and cash accounts before making the switch…

Margin Account vs. Cash Account

Now that you‘ve converted your Robinhood account to cash, let’s compare some of the core differences between margin accounts and cash accounts:

Margin Account

  • Can borrow funds from Robinhood to increase buying power.
  • Instant settlement available – proceeds from sales ready to trade immediately.
  • Restricted to 3 day trades in 5 days unless over $25k equity.
  • Charged interest on any margin loan amounts.
  • Risk of margin calls and forced liquidations.

Cash Account

  • Can only trade using existing cash account balance. No borrowing.
  • Standard T+2 settlement – takes 2 days for funds to settle from trades.
  • No restrictions on number of day trades.
  • No margin interest or risk of margin calls.

The trade-off is that cash accounts have no borrowing ability or instant settlements, but also no margin requirements or interest. Margin accounts permit leverage and shorting but introduce additional risks.

Neither account type is necessarily better overall. It depends entirely on your specific investing objectives and risk tolerance.

For many buy and hold investors, switching to cash-only removes the risks and limitations associated with margin trading. But frequent traders may feel restricted without the flexibility that having access to borrowed capital provides.

Understanding these key differences allows you to decide which account type fits your trading style best.

Next, let‘s go over what to expect after you disable margin trading on Robinhood…

What to Expect After Disabling Robinhood Margin

When you disable margin trading on Robinhood, here are some important things to keep in mind as your account switches over to cash:

  • Multi-day Process – It takes 2-3 trading days for Robinhood to fully convert your account to cash after you toggle off instant settlement.

  • Account Restrictions – Certain trades reliant on margin (like short sells) will no longer be permitted in a cash account.

  • Unsettled Funds – Cash from selling stocks takes 2 days to settle. You‘ll need to wait until settled to use those funds for new buys.

  • Day Trade Limit Removed – Unlimited day trades allowed in a cash account, but with the requirement of waiting for settlement.

  • Gold Subscriptions – Some premium Gold features aren‘t available in a cash account since they require margin capabilities.

  • Re-enabling Margin – Takes 2-3 trading days again if you ever decide to re-enable margin later by toggling instant settlements back on.

Overall the transition process is smooth and seamless in my experience. But be aware it does take a short period for the changes to fully take effect in Robinhood’s systems. Patience is a virtue!

Now let’s discuss some alternative options if you decide keeping margin would be beneficial after all…

Alternatives to Completely Disabling Margin

For traders who do rely on having access to borrowed buying power, but want to reduce risk, here are some alternatives to disabling margin trading completely:

  • Lower your margin usage – Borrow less and use more cash equity for trades.
  • Add cash to account – Increase cushion between your equity and margin limits.
  • Only use 1:1 leverage – Don‘t max out the 2:1 ratio most brokers allow.
  • Carefully track minimums – Monitor account value relative to margin maintenance minimums.
  • Use stop losses – Automatically sell positions before margin call triggers.
  • Downgrade Gold tier – Lower Gold subscription gives smaller margin limits.

Finding the right balance for your needs and risk tolerance is key. Margin can provide flexibility and leverage, but also introduces additional complexity and risk.

Think carefully before fully disabling it if you frequently rely on margin-dependent trading strategies. Tweaking your usage and settings instead may be an alternative solution.

Alright, those are some options if you decide keeping margin would be best. But let’s discuss the many benefits of switching to a cash-only account…

The Pros of a Robinhood Cash Account

Converting to a cash account on Robinhood has several advantages:

  • No borrowing – Your trades are fully-funded using your own capital, not borrowed funds.

  • No margin interest – You avoid paying fees and interest on borrowed margin amounts.

  • No margin calls – Zero risk of Robinhood forcibly liquidating your holdings due to insufficient equity levels.

  • Less restrictions – No pattern day trader rule tracking or other margin account limitations to worry about.

  • Forced discipline – Trading with only your cash teaches strict position sizing and risk management habits.

  • More stable – No reliance on margin loans means your equity stays more stable and consistent.

  • Beginner friendly – Removes complexity and risk until you become an advanced trader.

  • Peace of mind – The comfort of knowing your risk is limited to your cash account value, and that you can‘t lose more than you deposit.

Trading using only your own hard-earned cash equity simply gives you more control over risk and teaches discipline. For many investors, it‘s the smarter choice.

Okay, we‘ve covered a ton of great information so far about disabling margin and switching to cash. Let‘s wrap up with some final tips and takeaways…

Parting Thoughts on Converting to Cash

If you’ve decided to disable margin trading on Robinhood, here are some final pointers to leave you with:

  • Carefully review your current trading habits and determine if you truly require access to borrowed capital before fully disabling margin. You can always start with tweaking settings first.

  • Be patient during the transition process and expect restrictions on certain trades during the switch from margin to cash.

  • Ensure you closely monitor your cash balance and account for unsettled funds. Cash account trades have T+2 settlement, not instant.

  • Consider downgrading your Robinhood Gold subscription tier if you want to keep some margin benefits but reduce associated costs and risks.

  • Remember you can re-enable margin capabilities at any time by toggling instant settlement back on if you change your mind. The process is reversible!

  • Stick with a cash account for several months to adjust your trading habits to cash-only. Then re-evaluate if a return to margin would benefit you.

  • Take time to learn proper position sizing, risk management, and capital preservation skills necessary for successful cash account trading.

And that‘s a wrap! I hope this guide gave you a full overview of how to disable margin on Robinhood and convert to a cash account. Please let me know if you have any other questions! I‘m always happy to help fellow Robinhooders. Happy (margin-free) trading!


Written by Alexis Kestler

A female web designer and programmer - Now is a 36-year IT professional with over 15 years of experience living in NorCal. I enjoy keeping my feet wet in the world of technology through reading, working, and researching topics that pique my interest.