How Many Good Faith Violations Does Webull Allow?

Are you scratching your head over a Good Faith Violation notice from Webull? It’s essential to know that these violations occur when you sell stocks bought with unsettled funds in a cash account.

If this has happened to you, don’t worry; our guide is designed to steer clear of future slips and keep your trading on track. Discover how by diving into our expert advice below!

What is a Good Faith Violation?

Transitioning from understanding the basics, let’s delve into what constitutes a Good Faith Violation. This type of securities settlement violation occurs in a cash account when an investor buys shares with funds that have not yet settled and then sells those shares before the funds from the original sale settle.

In essence, it means you’re using money you don’t actually have available yet to make another purchase.

To clarify, let’s look at an example where a trader buys stock X on Monday and sells it on Tuesday but their funds from a previous sale used to buy stock X won’t clear until Wednesday.

That Tuesday sale would be premature according to the rules; hence, it would trigger a Good Faith Violation because the initial transaction was not fully completed with settled funds.

It’s crucial for investors using cash accounts to keep track of their buying power and ensure they are not engaging in transactions that could lead to these trading penalties.

How Many Good Faith Violations Does Webull Allow?

Webull takes a firm stance on good faith violations to promote responsible trading. You get some room for error, but not much. Specifically, you can accumulate up to three good faith violations within a rolling 12-month period before facing repercussions.

Cross that line, and your ability to purchase securities gets limited significantly; you’ll only be able to use funds that have fully settled in your cash account.

This policy is Webull’s way of enforcing the rules set out by the Securities and Exchange Commission (SEC). The brokerage aims to ensure traders are not taking advantage of unsettled funds which could disrupt market integrity.

The next step after hitting this limit involves understanding what happens when you actually receive a good faith violation on Webull.

What Happens When You Get a Good Faith Violation on Webull?

If you get a good faith violation on Webull, it means you’ve sold stocks before the funds used to purchase them have fully settled. This typically occurs in cash accounts when an investor buys securities and sells them again before the initial transaction clears, which usually takes two business days after the trade date.

You might not feel immediate effects after just one violation, but your account will be flagged. Keep track of any notices from Webull as these flags serve as warnings that there are restrictions on how you can use proceeds from sales.

Accumulate too many violations and expect stricter consequences; access to certain types of trading activity could become limited. After your first good faith violation, Webull will likely send an email explaining what happened and how to avoid future occurrences.

The platform may require funds for purchases in your account to settle completely before they can be used again if additional violations occur within a rolling 12-month period. Stay aware of the settlement period to ensure smooth trading experiences without interruptions or limitations imposed by regulatory rules.

Moving forward with stock trading activities requires understanding these guidelines thoroughly for successful management of your investments on platforms like Webull.

How to Avoid Good Faith Violations on Webull

To avoid good faith violations on Webull, follow these steps:

  1. Ensure Sufficient Funds: Make sure you have enough settled funds in your account before placing trades to prevent using unsettled funds.
  2. Monitor Trade Settlement: Keep track of the settlement period for your trades and avoid using funds that are not yet settled.
  3. Utilize Cash Account: Opt for a cash account rather than a margin account to eliminate the risk of leveraging unsettled funds.
  4. Plan Your Trades: Strategically plan your buying and selling activities to ensure all transactions are made with settled funds.
  5. Understand Regulations: Familiarize yourself with stock trading regulations and Webull’s account rules to adhere to the guidelines effectively.
  6. Review Trading Limits: Regularly review your trading limits and stay within the boundaries set by Webull to avoid breaches that may result in violations.

Consequences of Multiple Good Faith Violations on Webull

Multiple good faith violations on Webull can lead to serious consequences, including account restrictions and trading penalties. If a cash account incurs three violations within a 12-month period, Webull will restrict the account, limiting your ability to trade.

These violations can also result in stock liquidation and brokerage restrictions, impacting your overall trading activity. It’s crucial to be mindful of settlement periods and avoid making trades with unsettled funds to prevent these severe repercussions.

Understanding the impact of multiple good faith violations is essential for maintaining an unrestricted trading account on Webull. By being vigilant about settlement periods and ensuring that all trades are made with settled funds, you can mitigate the risk of facing such detrimental consequences.

Next: How to Resolve a Good Faith Violation on Webull

How to Resolve a Good Faith Violation on Webull

To resolve a Good Faith Violation on Webull, follow these steps:

  1. Review your recent trades to identify the violation and understand what caused it.
  2. Deposit additional funds into your account to cover the unsettled funds that led to the violation.
  3. Contact Webull’s customer support for assistance and clarification on the violation.
  4. Consider switching from a cash account to a margin account if you frequently encounter GFVs.
  5. Educate yourself about trading rules and settlement periods to prevent future violations.
  6. Keep track of your unsettled funds and trade with caution to avoid further GFVs.

The Impact of Good Faith Violations on Your Trading Activity

After understanding the process of resolving a Good Faith Violation (GFV) on Webull, it’s crucial to comprehend the impact such violations have on your trading activity. Unsettled funds can lead to cash-only restrictions and penalties if not managed carefully.

With three violations within 12 months, traders face a 90-day cash restriction that limits their ability to buy securities with unsettled funds. This hinders investment strategies and potentially affects trading opportunities.

Moreover, good faith violations can result in the liquidation of positions by Webull, leading to missed opportunities for profit or potential losses due to forced selling. Understanding these consequences is essential for traders seeking to navigate the restrictions and implications of GFVs effectively while managing their trading activities responsibly.

Tips for Managing Your Trades to Avoid Good Faith Violations

To avoid good faith violations on Webull, follow these tips:

  1. Maintain a sufficient cash balance in your account to cover trades without relying on unsettled funds.
  2. Use limit orders instead of market orders to ensure that trade executions are within settled funds.
  3. Keep track of your trading activity and settlement periods to prevent unintentional violations.
  4. Understand the trading regulations and settlement rules to make informed decisions about your trades.
  5. Consider the impact of unsettled funds on your trading strategy and adjust your approach accordingly.
  6. Regularly review your trading history and account balances to identify any potential risks of violating good faith rules.
  7. Utilize Webull’s resources and educational materials to stay updated on best practices for managing trades effectively without violations.
  8. Seek guidance from financial advisors or experienced traders to enhance your understanding of cash account trading rules and avoid violations.

Understanding the Settlement Period in Stock Trading to Prevent GFVs

The settlement period in stock trading refers to the time it takes for a trade to be finalized. It’s important to note that when buying or selling stocks, there is a specified timeframe during which the transactions must be settled.

This means that funds from a sale need to be fully available before they can be used again without resulting in good faith violations (GFVs). To prevent GFVs, traders should wait for their trades to settle before making further moves in the market.

Ensuring that you have sufficient settled funds before initiating new trades and refraining from liquidating positions before the settlement date are crucial steps toward avoiding GFVs.

Day traders, especially, should pay close attention to these settlement periods to prevent any unintended violations. By understanding and adhering to these settlement rules, investors can navigate stock trading more effectively while mitigating potential complications associated with GFVs.


1. What causes a good faith violation on Webull?

A good faith violation occurs when you buy a security and sell it before making full payment with settled funds in your account.

2. Can I avoid good faith violations on Webull?

Yes, you can avoid good faith violations by ensuring that the funds from your previous sales have fully settled before using them to purchase new securities.

3. What happens if I get a good faith violation on Webull?

If you receive a good faith violation, your account may be restricted from trading for 90 days to prevent further violations.

4. How can I remedy a good faith violation on Webull?

To resolve a good faith violation, you can either deposit additional cash into your account to cover the unsettled portion of the trade or wait until the funds from the sale settle before making new purchases.

5. Are there any penalties for frequent occurrences of good faith violations on Webull?

Frequent occurrences of good-faith violations can result in more stringent restrictions such as longer trading suspensions or even account closure.