hey everyone thanks for checking out this video my name is travis i'm the
creator of the master of the market education
you can find link below in the description and this is going to be a
video talking about the pattern day trader
also known as the pdt rule and i'm going to talk about exactly what this rule is,
how it may be affecting you as a day trader and then i'm going to give you
some tips that can actually help you avoid the pattern day trader rule and
legally place more day trades than you would be allowed to by
following this rule so anyway first and foremost what the
pattern day trader role is is a rule that was put into place by the
sec that is going to limit traders with accounts less than 25 000
to only three day trades per five business days
so obviously as a new trader most people do start off with less than twenty five
thousand dollars so because of that they're going to be
faced with the pattern day trader rule now anytime that you buy and sell the
same shares of the same stock within the same day that's going to
count as a day trade so again under this pdt rule you're only
going to have three of those day trades for five business days and really as a
new trader that can be a huge hurdle to get over
uh because somebody that is looking to learn how to day trade of course wants
to be able to practice and to put into place
as many trades as they like to but the pattern day trader role is going to get
in the way of that so with that being said if you want to
look to see how many day trades you may have available
uh the way that you would do that is by simply going into something like your
account or your account summary and then over
here on the left you can see that it's probably going to just tell you exactly
how many day trades you may have left and keep in mind that number is always
going to be three or less if your account is less than 25
000 however you may also see something like what we have over here on the right
side basically what this does is tells you
how many day trades you have available for the next five days and it
shows you when your next day trades are going to become available to you again
so if we imagine that today was monday and tomorrow was tuesday then wednesday
then thursday and friday this is going to show us how many day
trades we have available over the next five business days
now today being monday you can see that there are zero day trades available
however tomorrow we're going to have one day trade available still on wednesday
and then on thursday we're going to gain another day trade and then another one
again on friday so that's basically how you
can see how many day trades you have available to you uh regardless of what
type of trading platform you're using it's going to be something along the
lines of one of these two now anyway back to the pdt role itself
just to quickly recap why this was actually put into place the
reason it was is because the sec believed that this rule was going to
protect new traders from over trading and losing
all of their money too quickly now the reality of the pattern day
trader rule is that more often than not what it does is forces traders to hold
positions overnight that they would much rather sell and
exit out of ultimately creating more risk for the day trader
and unfortunately the pattern day trader role is not one that you can just break
and move on from without having any consequences if you do happen to break
the pattern day trader rule by placing more than three day trades
per five business days what's going to happen is your account is going to be
limited even further and in this case you're not going to be
able to place any day trades for 90 days unless additional funds are added to
your account to bring it to 25 000 or more
okay so with all of that being said now that you know about the pattern day
trader rule obviously you're probably interested in
learning how you can actually avoid the pattern day trader role
and get yourself some more day trades so first and foremost one of the ways that
you can do this is by using a cash account so really
when you open your account you're going to have an option to open a
cash account or you're going to have an option to open what is known as a margin
account and typically traders are going to use
margin accounts because what this does is allows them to use funds in their
account before that money actually settles
so every time that you buy and sell the stock once you sell that stock the money
is actually not going to go immediately back into your account
there's actually going to be what is known as a settlement period
and that's typically going to be two to three days however when you use a margin
account the broker is going to give that money
back to you immediately so that way you can use it immediately again to place
another trade or to start another investment so when
you open a cash account there's actually no pattern day trader
limitations on a cash account that means that you can day trade as much as you'd
like even if you have less than 25 000 the
catch is that you do have to wait for that settlement period to get your money
back to actually place your next trade so
that can be just as much of a hurdle if you're somebody that is using your
entire account on every single trade however if you're somebody that uses a
small portion of your account on each trade
you can definitely make do with a cash account because you're still going to
have the rest of your funds to trade with
while that small portion is settling over the next two to three days
now really my tip for this is to look for a broker that is going to offer a
settlement period of just one to two days and take
advantage of this to actually trade with your cash account
and to have as many day trades as you'd like
the next tip that i have to help you avoid the pattern day trader rule
is to open multiple brokerage accounts for example you can have one with td
ameritrade you could have one with robinhood and
you can have one with e-trade the way that this is actually going to
help you avoid the pattern day trader rule
is because you're going to have three day trades in each of those accounts
so in this case with three separate accounts each having three trades in
them per five business days you're going to
then have a total of nine day trades per five business days so the obvious
drawback to this strategy is that with three separate brokerage
accounts you're going to have to split your money up into a third
um and that's going to limit the amount of money that you have in each trade
but in my opinion this should not be that big of an issue because you don't
want to be rolling all of your money on every single trade in the first place
so by having smaller accounts you're going to be placing smaller trades
and that's going to of course reduce your risk and by doing so you're also
going to have plenty more day trades than you would
if you only had one brokerage account and that's going to lead me to the third
way to actually help you avoid the pattern day trader rule
and this one is going to be a little bit controversial because there are plenty
of different offshore brokers but many of them do have a bad
reputation and many of them do have a lot of hidden fees and other issues
with their platforms themselves however with that being said
finding a legitimate offshore brokerage and opening an account with them is a
great way to actually help you avoid the pattern day trader rule
and the reason for that is because the pdt rule is actually just a us-based
rule so opening an account with a foreign
broker is a viable way to get around the pattern day trader role entirely
again my advice for this is to simply make sure that you're researching the
broker beforehand and look into things like the client
reviews make sure to look at their different fees and commissions
see whether or not there are fees to use the platform
see whether or not there are fees to withdraw and deposit your money
and of course make sure that they do have some good customer service
so that way if there is an issue with the platform or you have any questions
there's going to be somebody there to actually help you with that
so anyway if you're a new trader and you're under the dreaded pattern day
trader rule i hope you found this video helpful and
i hope that you give some of these strategies a shot
to improve your own trading and to give you some more day trades available
but anyway thank you for watching the video if you enjoyed please make sure to
give the video a like and subscribe to the channel so you
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and if you're interested in taking your education a step further
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over a thousand active traders all at our website master the market
which can be found at the first link down below in the description anyway
thanks again for watching i hope you enjoyed
and good luck with your trading
you