How to bypass the pattern day trading rule with less than 25k.

The pattern day trading rule is a burden to anyone that is starting to day trade with less than 25k. Traders that execute four or more day trades over the span of five business days using a margin account. If this happens, the trader's account will be flagged as a pattern day trader (PDT) by their broker.

Pattern day traders are required to hold $25,000 in their margin accounts. If the account drops below $25,000 they will be prohibited from making any further day trades until their balance is back over $25,0000. 

So, how does a trader bypass this rule? 

Have multiple broker accounts. 

This also alleviates the dependency on one broker if your only broker fails to be up and running. For example, in the March 2020 market crash, Robinhood failed multiple times to be up and running. Traders were unable to close or make new trades supposedly due to the servers being overwhelmed. It was not just Robinhood though, other brokers were also having issues because of the high usage due to the volatility in the markets. 

These are my top brokers and I highly suggest opening accounts in all of them. 

  1. Fidelity
  2. Interactive Brokers (used with NinjaTrader software for futures)
  3. Tastyworks
  4. TD Ameritrade ThinkorSwim (ToS) platform
  5. Robinhood - Sign up and claim free stock (promotion)

By having 5 brokers, you are able to make 15 day trades = (5x3 day trades a day) 

That is more than enough for day trading.

One other thing I'd like to add is that if you decide to try and trade futures, the PDT rule doesn't apply.

However, if you are trading options, the PDT still applies. But here is a link on how to lock in profits on an options trade and stay in position bypassing the PDT rule. 

How to lock in profits on an options trade and stay in the position by The Lazy Trader

 

 

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