The Pattern Day Trader rule is a big nuisance for day traders with small accounts. If you have under $25,000 in a margin trading account, you are subject to PDT which means you cannot take more than three day trades in a five-day period. If you can’t get over $25,000, you probably want to find a way to trade without worrying about the limiting PDT rule. After all, if you’re learning to day trade, you most likely need more than three trades a week. Here are a couple ways to get around PDT.
Trade in a Cash Account
This option won’t appeal to everyone as cash accounts have limitations, too. But, if you are learning to trade and strictly taking long positions, a cash account can work nicely if you’d like to circumvent PDT. Cash accounts are not subject to the PDT rule but you do have to keep track of settled funds. You can’t day trade using unsettled funds, but there is no limitation on the number of day trades you can take as long as you are using settled funds.
To learn how to switch a Robinhood margin account to a cash here, read this post here.
You could also open a cash account in addition to your margin account if you’d like keep your margin account for trading. I personally have both types that I use for different types of trading and it works nicely. The biggest issue I have with cash accounts for day trading is you can’t take short positions. So, if shorting is part of your trading style, you’re going to need a margin account.
Open Multiple Margin Accounts with Different Brokers
You can have multiple margin accounts if you use a few different brokers. Each margin account will give you three more day trades so you can rotate through your accounts this way. You can’t achieve unlimited day trades, but you can increase the amount of day trades available to you this way. The problem with this method is you’ll need to spread your trading funds out across multiple accounts so you are effectively reducing your overall sizing ability. This isn’t a problem if you don’t go all-in on every trade (and you probably should avoid doing that unless you want to blow up your account) so it’s a reasonable way to increase your day trades.
I trade with two margin accounts: Webull and Interactive Brokers. I prefer the Webull desktop app for charts because it’s just what I’m most familiar with so even when I trade on Interactive Brokers, I’m using Webull’s charts as a guide for entries and exits. So, having multiple brokers doesn’t necessarily mean you need to become well-versed in every aspect of each broker’s platform. You do need to be comfortable with placing orders and there will be differences from broker to broker on order placements.
If you do decide to open an additional margin account, be sure your eligible for any sign up bonuses. If you’re going to go through the hassle of setting up multiple accounts, you might as well use the opportunity to collect bonus offers.
Sign up with Webull via this link to earn two free stocks when you open an account and fund it. Make sure you select Margin Account during the signup process if you’re trying to set up an additional margin account for yourself. It’s easier to start with a margin account than to change it later.
PDT doesn’t apply to positions that are held overnight. The best way to get yourself out of the grips of PDT is to grow your account to over $25,000. This isn’t as easy as it sounds, but honestly, if you can’t increase your account balance through trading, it may be wise to reconsider adding more money to your account or opening up multiple trading accounts. If you are learning to trade and have a plan in place to limit losses, then PDT can be a bother as you need to practice (and paper trading doesn’t always give the same experience as using real money). If you can learn to swing trade successfully, you give yourself a lot more to work with in terms of trading frequency.
This only work s if you are familiar with crypto and have a plan for trading it. A lot of people get caught up in crypto when Bitcoin is running and then FOMO in at the top and end up losing a lot of money. So, don’t just jump into crypto trading simply because you can do it without using a day trade. It’s its own monster and you need to know what you are doing first.
I trade crypto on WeBull in my margin account during certain crypto market situations and I really like that it doesn’t use up a day trade. It’s a very different kind of trading though, so think carefully before diving in. Having the ability to trade stocks doesn’t mean you’ll be able to trade crypto just as well.