Are you trading with a small account and under PDT? Well, here are some ways to get around it and my tips on how to trade with a small account under $ 25,000. This rule could be kind of limiting. Since that means, you can only day trade three times a week, so in this video we'll be talking about the four ways to get around the PDT rule and some useful trading tips. I have for you if you are beginner trader with a small account.

So if you're new to trading and want to start making a Lamborghini money, remember to drop a like at the bottom of the video just kidding only Corolla and civic money here. First of all, let's go over exactly what this PDT rule is. It's a stupid rule. My mother told me when I was little.

I have to ask your permissions every time I want to eat my Halloween candies from trick-or-treating, and I can only do so three times a week, even though those hard-earned candies and chocolates are so rightfully mine. How is that? Even fair, okay, somehow that analogy has to do with the PDT rule. You just kind of have to figure it out just kidding. I never had to deal with the PDT rule and I never had a mother who lets me eat candies either.

Pdt rule stands for pattern day, trader rule. It was established in 2001 by FINRA and the United States SEC. Basically, it limits how many times you can day trade a week if your account is under $ 25,000. Under the PDT rule, the day trader can only place three day trades in a consecutive five-day period a day.

Trade is when you open and close a position within the same day. So, for example, if you buy and sell a stock or short and cover a stock position, these are considered round-trips and they each count as a day trade. Basically, if you're trading within accounts, less than $ 25,000 and hence under PDT rule - and you decide to place two round-trips on a Monday and then one more on the Tuesday, then that means you cannot they train again until the following Monday, too many beginner day, traders With a small account, this could be quite a limitation after all, it's your hard-earned money, it's difficult to accept that the SEC should be able to limit your access to buying power all in the name of protecting the investors, but the PDT rule is not necessarily a Bad thing, all the time I have some really useful trading tips for beginner traders, with a small account later on in the video so hold on tight. So how do you get around the PDT rule? Well, here are some options for you.

The first option is to use a cash account. This is a little-known fact that many beginner traders don't realize PDT rule only applies to margin trading accounts margin trading allows you to use leverage, essentially borrowing money from the broker to trade. So that say, if I have a $ 5,000 margin accounts with Interactive Brokers, since the broker allows me four times, leverage my buying power to day trade is actually twenty thousand dollars. So if I'm looking to buy a stock like CCL Carnival Cruise Lines, that's currently trading around eleven dollars.

My maximum sheer size I can take is a little bit over 1,800 shares, but since I'm using that $ 5,000 in a margin trading account that would subject me to PDT rule. Alternatively, you can open a cash accounts with any of your brokers, since the account is in cash, you will not have access to leverage the twenty thousand dollars of buying power that we mentioned earlier. So you are true. Buying power is the same 5,000 dollars you have in cash.

That means, in this case, the most CCL shares I can buy is around four hundred. Fifty four shares the benefit of trading with a cash account is, of course, you're not subjected to the PDT rule and the three day treat the limitation per week. But the downside is, you need to wait for the cash to settle after you sell the position. The settlement is two days: that's the standard across most of the brokers.

So, for example, if I decide to buy the most CCL shares, I could, with the same $ 5,000 cash account. I buy and sell 554 shares a Monday. I will not have access to that cash again until Wednesday. I know some of you are getting frustrated right now, but a humble trader, that's exactly the same as trading under a PvP rule you're a liar, but that's a if you trade, smaller size.

Instead of using the entire $ 5,000 cash to buy a single position, what if you divided it up to use $ 500 or $ 1,000 gross exposure per trade? So if you use $ 1,000 of that cash today trade CCL on Monday, you still have access to the remaining four thousand dollars to trade on Tuesday, and then you get the cash settlement back on Wednesday and so on and so forth. Basically, if you could allocate meticulously just $ 500 or up to $ 1,000 position for each trading day, you could be in a better position and have access to more day trades than if you are trading under PDT, with a margin account and yes, obviously, this method Will only benefit you if you had a bigger account size of a couple of thousand dollars if you're trading with just 500 to a thousand dollars, you really don't have much cash to work with whether you're trading in your cash account or a margin account under PDT. Another downside that's worth noting is that you cannot short, sell a stock with a cash account, but for most beginner traders, starting out it's better to learn how to buy what long a stock anyways. The second way you can do to avoid PDT.

It's a variation of the first one. Instead of opening one single cash account or one margin account with $ 5,000, you could divide that capital up into multiple margin accounts. So if you take that $ 5,000 and you split it into two separate margin account different brokers, then you have a total of six day trades a week and if both of the brokers still give you four times leverage, then you still have a total buying power Of $ 20,000 and honestly, that's not bad. Now, obviously the more capital you have, the more margin accounts you can open and access even more day trades.

If you have a total of let's say $ 10,000, then you can open three or four margin accounts depending on the broker minimums and then you can have access to a total of nine or twelve day trades a week. Now the third option for day traders, with a small account to avoid PDT, is to marry a Canadian move to Canada, apply for permanent residency hit that like button to get approved and then open a brokerage account here in Canada and voila. You don't have to trade under PDT now, if only I know a day trader in Canada. Okay, oh jokes, aside, the third option to avoid PDT is actually one that I wouldn't strongly recommend, but some traders might choose to do this.

It's to open an offshore trading account only the us-based brokers have to follow the FINRA and the SEC rules, which includes the PDT rule, some offshore brokers. I know many traders use our ce mec and trade, zero, there's, no PDT rule a/c Meg and it's the same thing: a trade, zero international. But the thing is trade, zero international. They do not accept US applicants.

American traders have to go with trade zero America, which still has the PDT restriction using an offshore broker, could mean a lot more risks for the traders and investors since the brokerages are not regulated by FINRA. A really good example of this was sure trader. It was an offshore broker in a Bahamas back in two thousand fifteen and sixteen sure trader was very popular among the American traders in order to avoid trading with et restriction. But unfortunately, in 2019 sure trader was shut down due to a lot of controversial issues.

Involving penny stock pump and dump scheme involving the insiders poor record-keeping and violating some of the financial rules and regulations. We're not gon na go into the details here, since that broker no longer exists. But this is why I do not recommend going with this route unless you absolutely have to. If you choose to trade with an offshore broker, make sure you read all the reviews, fine print and just understand the potential risks and regularly withdraw your funds from your account.

The fourth way to get around the PDT rule is to buy and swing over a position overnight, since PDT rule only applies to day trades, meaning when you buy and sell a stock within the same day when you buy and hold a stock overnight and sell it. The next day into pre market spike or the morning, push that does not count as a day trade and it's the same thing if you decide to get into swing trading for a couple of days or a couple of weeks, I have a video on my buy Overnight strategy, if you want to check that out, that brings us to the topic of a lot of costly mistakes. I see beginner traders make because they're trading under PDT rule here are some important tips for trading with a small account that might help you out. First of all, make sure you're keeping track of your three-day trades and check yourself before entering each trade.

If you break the PDT rule, you might receive just a warning the first time from your broker, but the second violation could result in the broker. Freezing your entire account for 90 days or until you can fund the account above $ 25,000. Second tip only use your day. Trade.

If you see a quality set up, do not force trades. I see a lot of new traders on the PDT rule and they feel like they must use up all the three day trades for the week. Otherwise, it's waste, and no that's absolutely not true. If there's no a-plus setups for you in this market condition, do not force trades, that's what we call over trading same thing with swinging a stock overnight, don't enter a swing position just because you used up all your three-day treats for the week and you are gon Na hold the position overnight, just for the sake of it or even worse, tip number three.

You should never turn a losing day trade into a swing trade. I see many beginner day. Traders lose track of their day trades on the week and they realize they cannot sell a day trade position because of the risk of violating PDT rule, so they end up having to hold a losing position overnight. What happens if the shady penny stock company decides to do an offering after markets closed or pre markets the next day, you should never ever turn a losing day trade into a swing trade.

That's what we call bag holding or trading on hope. Like I mentioned many times before on this channel day, trading is a business, it's not a hobby and definitely not something. You can just pick up in one or two weeks, because you suddenly have the time to sit in front of the computer all day during quarantine. So we all know it takes money and capital to start a business.

It's the same way with trading it takes money to grow. A small trading account the minimum. I would recommend to start day trading it's at least 4,000 or 5,000 dollars trading under PDT rule. It's not necessarily a bad thing, if anything, it forces a new trader to be even more selective and patient only entering traits that may have planned out for as they're a plus setup, no chasing breakouts and definitely not following chatroom alerts.

So let me know in the comments below: are you trading under PDT rule and are you using any of the four methods I mention in the video? Thank you guys so much for watching as always and the homo trader and I'll see you guys next week. Hey guys, thanks for watching, I hope you enjoy the video and the bad jokes if you want to see more day trading content, make sure to subscribe and follow me on Twitter and Instagram for more. If you'd like to trade with me daily and get my free weekend, watchlist and trading journal make sure to check out the links below for more resources. Stay, green, stay, positive and I'll.

See you guys next time.