The pattern day trader rule - maybe the number one most hated rule - slash regulation in day trading. If you've got a small account. Today, we're gon na be talking about what it is and some ways to manage and work around the PDT.. So couple things right off the bat, keep in mind, my friends, that one thing that and I'm gon na touch on several things, something that a lot of people don't realize.

Is they? They know that the PDT pattern day trader rule applies to accounts under 25,000, but only margin accounts., So right off the bat, maybe one of the best tips. I have now again I'm gon na talk about trading methodologies in this video, but don't underestimate the value of a cash account. Okay, I've got other videos breaking down the differences, but remember if you're new, the biggest advantages of a margin account are margin. You know, obviously being able to multiply your buying power, which is dangerous for new traders.

Okay, Very very dangerous., Remember margin cuts both ways. And then the other thing. A margin account allows you to do is short stocks. Again.

In my opinion, shorting is a very, very, very profitable, high risk-to-reward strategy., But in my opinion, it's not for newbies. It isn't. And so just understand. Cash accounts are an option and they're not subject to the pattern day: trader rule.

All right now we're talking PDT Tim talk about the PDT.. So what is the PDT? It is the epitome of one of my favorite Ronald Reagan, quotes., And I always use this quote. When I talk about the PDT. And one of my favorite Ronald Reagan quotes is ``.

The nine most dangerous words in the dictionary are ``, I'm from the government and I'm here to help.''. Okay, So the PDT came after the dot com boom. And the idea was people were over trading. We got ta, protect them from themselves, which never works..

I mean it's one of the great things about a free country. Hopefully you know you're in a free country, wherever you're watching this. Listen, you can make your own mistakes.. That's one of the greatest things about America, one of the greatest things about free countries..

You screw up, you figure out what you did wrong and then you don't do it again. Okay, But anyway, the idea behind the PDT was to protect. You know Joe and Jane public, like you and I from themselves. Yeah..

We probably need someone to protect us from you, Mr. Government., But anyway, that being said, the idea was people are over trading.. Let's limit how much they can. Trade., So in their masterful genius they decided that you could only enter and exit the same ticker in one day three times in a rolling five day period.

Right, It's you know even when, when I say it I'm just like you know it just doesn't make any sense. Okay. So the idea is RKDA. We're gon na talk about..

So if you bought RKDA at say 9:45 this morning when it broke out, and then you sold into that rip at noon, when it spiked all the way up to two, that's a round trip., You were in and out of the same stock in the same day And you could have shorted a stock too. Say you shorted RKDA at you know, I don't know you nailed the top right here at 150 and you covered at 130. Same deal round trip. Doesn't matter if it's long or short, okay.

So now you've used one of your three day. Trades., Let's assume today is Monday, even though it isn't.. So today is Monday. You've used one of your day, trades and now tomorrow same thing, Wednesday same thing., You're in and out of the same stock.

In the same day, round trip. So now it's Wednesday and you've used all three of your day trades.. So now you cannot enter and exit the same stock in the same day until Monday, when you get one of your day, trades back. Okay.

So then, let's say you don't trade on Monday. Tuesday comes you've now got two trades back. Wednesday comes. You've now got all three of your day: trades back., It's based on the days of the week, too.

Weekends, don't matter. Rolling five trading day period, okay, And so let's say today's Monday. If you go in and out of you know three stocks today, you have no day trades'til next Monday., So it just again every time I explain it, I'm just like I wan na face palm., But that's how it works. Okay And it's supposed to protect you from yourself., So all right Tim, I got a margin account., I wan na short stocks.

I wan na use leverage.. How do we actually manage this to save as many day trades as possible? Okay, this is what I'm gon na say. And this jives with a lot of the stuff that I teach in the SteadyTrade Team, especially for newer traders.. One of the best ways to manage your day trades and work around the PDT is specifically focus on the afternoon.

Okay, Hear me out because listen if you're trading really volatile stocks in the morning, you got ta, take gains, okay, So the bummer and that's great. If you win all the time, okay, but the thing is, if you're trading in the morning, you're trading, those dip and rips check out the video we'll link'em, it's awesome., You know: listen AGRI, amazing, dip and rip this morning. Look at this thing. When it broke the High of the day at 2:30 went all the way to five..

Well, you got ta sell on that rip. Okay, You got to.. This is a very sketchy. Stock., Probably drop me a comment: below.! What's AGRI trading at today, Probably a dollar okay, So you got ta sell into these rips if you're trading in the morning, which is awesome., Listen if you made two bucks a share on this thing: hey killer well done, but you just used that day.

Trade., So tomorrow you do another one. Wednesday. You do another one. Again now you're on the bench.

Okay And if they're all winners, that's awesome, but we know they're, not gon na all be winners.. So the mechanics I mean when you're trading volatile stocks. You have to be in and out in the morning, which warrants using all your day, trades. Now, vice versa, let's go back to RKDA a stock.

That's on the VWAP hold scan right now.! You can see it's right. There. Hugging around VWAP, big gainer agricultural stock, hot sector, unusual volume, relatively low float.. You wrote down all those right.

You heard'em all., It's it's the VWAP hold high day break.. I got an e-book on it., There's, probably 50 videos on the channel on it. Okay, I'm not talking about screeners., I'm not talking about chart patterns., I'm talking about time of day and how to manage the PDT.. So what we're looking for is the stock's currently pulling back..

You can see I'm recording at roughly 12:45 P.M. Midday., So we wan na wait until after the 2:00 P.M. window for confirmation move back through those high of day.. Now what that allows us to do is the later.

We can wait in the day, the more likely and the higher probability that this stock is gon na close at or around the high of day, which then makes it a gapper setup. Okay Stocks that close at the high of the day, especially when they're multi-week multi-month breakouts like RKDA, is you can see. This is a breakout going back six months., So you've got multiple timeframe: alignment again technical analysis, 101 check out the ebook blah blah blah., But you've got trend alignment on the daily, as well as the inter-day and stocks that close near the high of the day. People tend to get all excited about'em at night.

They do market orders in the morning and they gap. That's great for you, because now you can hold this stock overnight.. Let's say an ideal situation would be RKDA hitting the high of day at like 3:45 P.M. Okay.

You can buy that stock.. Now you hold overnight. If things work out, you always have to have a plan. The stock gaps.

Say it gaps to like 250.. Now you can sell into all those newbies' market orders which we love those newbies with those market orders.. So they're just hitting the ask okay They'll pay any price, ,'cause they're all full of FOMO, and they got ta get day in at the market, open. Stock gaps to 250.

They buy your shares.. You just basically made a day trade at the end of the day. You're day trading, but overnight, with gappers hot sector stocks trading, unusual volumes, with multiple timeframe alignment and with news.; Okay, All those things., So you're in essence, day trading. But you didn't use a day.

Trading'Cause, you sold the stock the next day. Okay, So that's what you look to do. Afternoons afternoons, afternoons., Use that VWAP hold scan and listen if anything, if you're under the PDT, don't even look at the market until like right now, 1:00 P.M. I'm serious..

If you're trying to manage your day trades, unless you wan na, be locked outta, your account ,'cause, that's what they'll do you use up your day, trade, your booker will lock you out and they're like ``. You cannot trade right now.'' If you wan na deal with that focus on mornings., If you wan na stretch out those day trades focus on the afternoons.. Now, let's talk about the contingency and the biggest thing I see people screwing up., Let's assume RKDA makes the move.. I don't have a crystal ball., Looking good right, now.

Consolidating at VWAP, okay, Let's say it makes the move., Where you use your day, trades. Okay, look into the camera, look into my eyes, all right ,'cause. This is where everybody screws up., And this is where the unintended consequences of the PDT. This is where you know in the famous government regulation world I got another quote for ya: `` The road to hell is paved with good intentions.''.

Okay, What trips up so many people is they don't wan na use those day trades, so they hold a loser., And this is the unintended consequences., And this might be the biggest thing that enrages me about the PDT when it comes to newbie traders, ,'cause now, RKDA Spikes to two you take the trade and then it falls apart. Late day., Maybe there's news, maybe the market's ugly and you hold a loser'cause you're like ``. Well, I don't wan na use a day. Trade., `` I'll just hope something good happens.

Tomorrow.'', Don't do that. In this strategy and I think this is the best way to manage the PDT. You use your day trades to take losses or ridiculous gains. Okay, That's when you take that day, trade into the late day., So two scenarios., Let's say RKDA spikes.

Two and just something crazy happens. It goes to like five.. Well, listen. You made three bucks a share on a $ 2 stock..

You burn that day, trade. I call it and you take those gains.. That's gon na happen every now and then. Every now, and then you just gettin''em.

You catch an amazing move.. What's gon na happen, more often RKDA fails pulls back and you're staring at your stop. Loss. You're.

Looking at that number and you're, like `` Man, do I use the day trade or not ?''. The answer is always: yes: okay, ?'Cause these volatile stocks. When the momentum stops, it's like musical chairs, okay, Everybody falls down real fast., Don't fall for the road to hell paved with good intentions of government regulations. Okay, You burn your day.

Trade., You use it. ,'Cause things always get worse. Okay, That's the big thing with holding losers. Overnight.

Man, I'm full of quotes from the SteadyTrade Team.. One of my favorite quotes is ``. Winners. Hold winners and losers hold losers.'' Okay.

Why do so many people lose in the market Because losers hold losers. And that's what losers do? Okay, You're, not gon na be one of those. You're gon na be one of the 10 % that are successful., You're gon na hold winners and then sell the gap. The next day, but you're gon na cut your losers and you're gon na burn the day, trades and you're gon na take those small losses and that's what's gon na put you in the 10 % that win..

I think the other great way is hit. The link below and check out the SteadyTrade Team. We'd love to work with you and have an amazing day, my friends.. Hopefully, this video was helpful and I'll see you next time.