Ways to Avoid the PDT Rule

The PDT rule can hinder a trader’s growth, should they be trading below the threshold established by the SEC. Day trading is not near as easy as it sounds, and requires extensive knowledge of market and trading strategy to produce successful numbers. The ideal conditions for day trading is to have a well-funded account and a substantial amount of experience in riding the intraday waves. The financial hurdle is obviously that not everyone can afford to drop $25,000 or more to fund a trading account to get access to unlimited day trades.

pdt rule

So for those of you that need another option, a way around that $25,000 rule, I have a few options for you…

Beat the System

 Option 1: SureTrader

Suretrader is your best option when it comes to beating the pattern day trading rule, and is one of the best brokers available to traders for a number of reasons. One primarily being that the Pattern Day Trader rule doesn’t apply to any account on SureTrader. The reason being that SureTrader is not located in the United States, and therefore is not subject to the same trading regulations. SureTrader is owned by Swiss America Securities, which is actually based in the Bahamas, and therefore has no PDT rule. You can make as many day trades as you want with as little as $500 in your account, they have cheap commissions, and you even get extra buying power with 6:1 leverage.

Another huge pro with SureTrader is the shares they have available to borrow for shorting stocks. They have the largest short list of any broker with 10,000+ stocks which include penny stocks.

Option 2: Rolling 5 Option

Other than Suretrader, I think this is one of the best and safest options for day trading an account with a balance of less than $25K. Each trader is permitted to execute 3 day trades during a rolling 5 day period. Although you won’t get 4x the buying power, you can still use the regular 2x margin to trade.

This is a good option simply because it forces you to be more selective in your choices for the securities that you trade. As a result, you may see a number of mediocre set-ups one day, but you’re more likely to pass on them to wait for more optimal set-ups since your day trades are limited.

Option 3: Multiple Brokerage Accounts

Let’s just say you have only $5,000 to trade, and you are convinced day trading is the way to go. You could open two different accounts with different brokers and split the funding between them. As a result, you will essentially be able to execute 6 day trades within a rolling 5 day period (but with only 2x buying power), which should be more than enough for novice traders.

Option 4: Split Brokerage Account Wash

This option involves the same set up as above, but is recommended for advanced traders only. If you like the idea of essentially having unlimited ability to day trade with a sub-25K account, aside from Option 1, this method should appeal to you.

Step 1 is to take a long trade of 5000 shares in ABC Company with broker #1. When the time comes to “close the position,” short ABC Company 5000 shares with broker #2, effectively making you flat between the two. Close each position the next day, without using any of your precious 3 day trades.

Use caution, with this option you will incur some extra costs due to having 4 orders eligible for commission instead of 2, and possibly even a little slippage depending on the width of the ask/bid spread on the security you are trading.

If you have any ways that you avoid the Pattern Day Trading rule that I didn’t mention above, please feel free to comment. If you learned something knew, share it.

Avoid the PDT Rule

5 thoughts on “Avoid the PDT Rule

  • January 31, 2016 at 12:17 am
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    There’s another broker, similar to suretrader, no PDT rule and up to 6:1 leverage, and no commissions for non market orders. It is also based on the Bahamas but they don’t allow american accounts yet. The name is tradezero.

    Reply
    • January 31, 2016 at 1:27 am
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      Will do some research on this. Appreciate the feedback and the mention.

      Reply
    • March 11, 2016 at 10:21 pm
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      SureTrader has the worst customer service ever and their trading platform is known to freeze and have errors.

      Reply
  • March 11, 2016 at 11:58 pm
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    Can I just say one thing about Suretrader. It’s a good way to day trade with small account but
    It’s harder to make money since they trade against you.

    “All transactions are executed against Swiss America Securities, Ltd. in a principal capacity and we may make money trading as your counter-party. You should consider this conflict of interest before placing trades.”

    Reply
  • May 16, 2017 at 9:47 pm
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    If you have a tiny account and don’t want to trade OTC, consider Robinhood Cash account. zero commission. Little bit of a pain.

    Reply

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