How To Avoid PDT Rule

To avoid the Pattern Day Trader (PDT) rule, you need to understand what it is and use strategies to legally work around it.

🧾 What Is the PDT Rule?

The Pattern Day Trader rule is a U.S. FINRA regulation that applies to margin accounts. It states that:

If you make 4 or more day trades within 5 business days and those trades are more than 6% of your total trading activity, you’re flagged as a Pattern Day Trader (PDT).

Once flagged, you must maintain at least $25,000 in your trading account — or you’re restricted from day trading.

✅ Legal Ways to Avoid the PDT Rule

1. Use a Cash Account

In a cash account, you’re limited by settled funds, not the PDT rule.
You can’t use unsettled cash (takes 1–2 days to settle), but:
- You can make unlimited day trades, as long as you’re not reusing unsettled funds.
Great for small accounts doing low-volume trading.

2. Keep Trades to 3 or Fewer in 5 Days

Stay under the PDT threshold: no more than 3 day trades in 5 rolling business days.

3. Maintain a $25,000+ Balance

If you can fund your margin account with $25K or more, you’re not subject to PDT restrictions.

4. Use a Foreign Broker (Non-U.S. Residents)

Brokers outside the U.S. (like Interactive Brokers Canada, TradeZero, or CMC Markets) may not apply PDT rules.
U.S. residents are often still restricted, so this works best for non-U.S. traders.

5. Trade Futures or Forex

Futures and forex markets are not subject to PDT rules.
These markets are 24/5, have leverage, and often lower capital requirements.
Requires different strategies and risk management.

6. Use Multiple Brokerage Accounts

Spread trades across two or more accounts to avoid exceeding the day trade count in a single account.
Risky and complicated, but possible for experienced traders.

⚠️ What Not to Do

Don’t try to hide day trades by switching accounts mid-trade — brokers can flag that.
Avoid free-riding in cash accounts (trading with unsettled funds) — it can get your account frozen.

Summary: Best PDT Workarounds

Strategy	Works for Small Accounts?	PDT-Free?	Notes
Use Cash Account	✅	✅	Avoid using unsettled funds
Keep <4 Day Trades/5 Days	✅	✅	Easy but limits flexibility
Fund $25K+	❌ (needs capital)	✅	Fully unrestricted
Trade Futures/Forex	✅	✅	No PDT, different market dynamics
Use Offshore Broker	✅ (non-U.S. only)	✅	Depends on jurisdiction