I keep getting flagged as a pattern day trader on TD Ameritrade. My account is under $25K and they're saying I can't make more than 3 day trades in a 5-day rolling period.
I've heard if I switch to a cash account instead of margin, the PDT rules don't apply. Is that actually true? What's the catch?
Exactly. With $10K you could split it into thirds and rotate. Monday trade with $3,333, Tuesday with another $3,333, Wednesday with the last $3,333. By Thursday your Monday funds are settled and available again.
Also watch out for good faith violations. If you buy stock with unsettled funds and sell it before those funds settle, that's a GFV. Three GFVs in 12 months and your account gets restricted to settled funds only for 90 days.
This is super helpful. So it sounds like cash account is legit for avoiding PDT, but I need to be careful about:
Are there any brokers that are better for cash account day trading? I've heard some are stricter than others about settlement violations.
I've been doing cash account day trading for 2 years. Here's what I've learned:
Fidelity: Pretty lenient, good warnings before you trigger GFVs. Interface shows settled/unsettled clearly.
Honestly the broker matters less than your discipline. Set up a spreadsheet to track what cash settles when. I use different "buckets" of cash for each day of the week.
Perfect. I requested the switch to cash account with TD yesterday. Going to try the "bucket" approach.
Appreciate all the detailed info, especially the regulatory citations. This makes way more sense now.
If you're getting threatening IRS notices, the first thing to do is verify they're real. Call the IRS directly at 1-800-829-1040 (never the number on the letter) and reference the notice number.
A good tax attorney is worth the cost for complex situations like this.