Ah, the PDT rule. So the US Government says that if we don't have $25,000 in our brokerage account, that we must be little babies that can't manage money ourselves. Wham wham wham. So they went ahead and made a rule called the PDT rule which limits the amount of day trades that we can take in a given time span and the government's eyes.

It's fine if we take out a risky loan and gamble it on French bulldogs, But for some reason Regulators are shocked to take that somebody that has under 25,000 in their account would be able to make rational decisions when it comes to the stock market. And God forbid if these people think that they could both buy and sell on the same day. The audacity. The PDT rule makes it so that once you pass three-day trades, you're a lot of three-day trades per five-day period.

You can't sell out of your position. So if you're in a position and it takes a turn for the worst and it starts plummeting, the broker won't allow you to sell the stock because the government doesn't let them. So in other words, in order to protect you and your capital, the government will force you to stay in a losing position. But of course it's Zip trader.

We don't like to follow those rules So by the end of this video, you will be able to wave your hand goodbye to the PDT rule and of course wave something else to the regulator's behind it. And as always the only thing I ask. The only thing is that you hit that beautiful and ravishing like button. And also, if you see value, don't forget to subscribe for more.

Short sweet and simplified videos on how to trade the stock market. Ok, let's go ahead and start from the bottom. When we push the Buy button to purchase a Sheriff's update from a broker, the cost of the share leaves our brokerage account and we are given the share in return. Then, when we want to sell the share either at a profit or at a loss, we are credited the value of the share that we sold.

But there is a settlement period for the actual cash to turn up in our account. The reason for the settlement period is simply because brokers take time to exchange shares amongst themselves. Now, the settlement period varies. The going standard is usually T 3, which means it takes three business days to settle.

Now that's been true traditionally, but the SEC has lowered the settlement date to 82 period, which means two business days. That makes it a bit easier on us. now. New brokers are coming out all the time that advertise lower settlement dates, but we'll talk about that in a bit.

But in any case, with most brokers and I'll take about three days to settle, that means that whatever cash is unsettled is now no longer available to trade with during the time span of the settlement date. If I was to put this another way, you may have a shake money this morning to buy a share, but now that you've sold it in the afternoon, you no longer have access to it even though you've already sold this year. And there's a settlement period whenever you sell shares. So this isn't just an intraday thing, but the problem is that this means that if you're trading with a large portion of your account, you now have a lot less capital to work with for the time being.

And if you're an active trader, odds are strong that you'll take you a lot more positions than just the one, so this will become an even bigger issue as your funds become more locked up in the settlement period phase. Notice All this problem: Brokers will generally set you up with margin accounts that allow you to trade with your own money, but also allow you to trade with their money. And that's where the word margin comes in. The margin that the broker allows you to trade with tends to vary.

You could probably call them and get it increased if you really wanted to, but at the very least, it allows you to increase the number of trades that you can make and the size of the positions. And that means that you no longer have to wait for funds to settle in order to have enough capital trade-off of. Because now you have the brokers money as well. So the idea of trading on margin scared regulators, so they decided to implement the PDT rule.

And to be clear, what regulators decided is that if you are a trader that has under twenty five thousand in a margin brokerage account, that now you can only complete three-day trades within a five business, they P really she meet their specifications. If you buy shares on Monday and sell out on Monday, you've just used one day trade. If you buy shares on Monday and sell out on Tuesday, you didn't use a day trade and you still have three day trades. And in summary, the PDT rule applies to you if you one have a margin account and two have less than 25,000 in it.

Okay, so now that we've gone over what the PDT rule is, who it applies to, and the overall idea behind it, let's go into how we can avoid it. What would your family say if you came down with PDT Okay, so number one. So since the PDT rule says that you could only make three-day trades in a margin account, the first way around it is to simply open up more accounts. This means that you could have one account.

Let's say Weeble. Which by the way, we have a free stock promotion link in the description for them. One with TD Ameritrade, one with Robin Hood and one with maybe a random broker, you stock trade. And now that you have four brokerage accounts, that means that now you have four times the amount of day trades.

So instead of being limited to three day trades, you're now limited to 12. Now, the obvious issue with this is that if had a small amount of money to begin with, you've just divided it into even smaller pieces. But if you have four margin accounts, I'll just strong that you've also increased the amount of overall margin because you've applied through more brokers. Now it's not a good idea to trade with money that you don't have, but if it's unsettled, that's money that you're going to get.

So just be careful with that. And this is one of the ways to avoid the PDT rule. Okay, so number two. So since the PDT rule only applies to margin accounts, one of the simplest ways to get rid of it is by simply not having a margin account.

In other words, that's by having a cash account. In a cash account. The amount of cash in your account is the limit in terms of how much you can trade with, but because the cash in your account is the limit at how much you can trade with, that means that you have to deal with the settlement delay issues. That means that once you've traded with all your capital, you're going to have to wait usually several days to trade again with it.

So you're still limited in the amount of day trades that you have using the cash account. It's fine if you have a larger amount of capital and you're making smaller positions, but if you're taking large positions, it's not great. So using a cash account still effectively limits the amount of day trades that you can take. Nonetheless, depending on the amount of capital you have, this is going to be a lot better for out than just simply following the PDT rule.

The key is finding a broker that has a low settlement time so you can minimize the amount of time that your capital is locked up. For example, you stock trade offers same-day settlement, but the problem with same-day settlement is that if a broker offers it, it's probably because it's coming from their own network and that can cause a host of other issues. So make sure to research whatever broker you're using very thoroughly before using it. The only brokers that I personally endorse that zip trader personally endorses are Weeble and TD Ameritrade and unfortunately, neither of them offer same-day settlement.

Okay, so number three is one that I wouldn't necessarily recommend, but it is an option. Number three is to simply trade using foreign brokers. Since the PDT rule only applies to Us-based brokers, if you trade easy brokers in another country, you can almost always surpass the PDT rule. Now, the trouble here is that a lot of foreign based brokers that cater to U.s.

citizens or other foreign citizens aren't the best brokers. A lot of them offer slow executions and a lot of them kind of nickel and dine you everywhere. There's a major trading platform that you probably know a lot of folks know them that is based in the Bahamas and falls into this category. I'm not a huge fan of them and I don't to say who they are because that would be giving them free advertising.

But my point is that foreign brokers that you could use to get around the PDT rule do exist, and if you wanted to go that route, you could potentially do that. Okay, so number four, number four is to simply concentrate your effort on finding only the best setups, practicing with those, and only executing three times a week to fall under the PDT rule. Now I Know this isn't exactly getting around the PDT rule, rather it's the opposite. Its following it.

But hear me out. Great trading setups happened every day, but the best only happened a few times a week. If you were to focus on only trading the best setups, you'd get the best part of it. And then once you built your account, you can get everything else.

But moreover, taking only three day trades a week in the beginning may allow you to focus more on your swing trading. It also might be more practical if you also have a nine-to-five And since swing trading is a great way for beginners and really anybody to learn about trading and also trade consistently without having to watch the price constantly, this isn't a terrible route to go. and because swing trading doesn't involve same-day executions, it won't fall under the PDT rule. Okay, so those were the four ways that I recommend in terms of passing and saying goodbye to the PDT rule.

Of course, you could also elect to do a combination of these things and that's not a bad idea either. But the point of this video is to say that the PDT rule doesn't necessarily negatively affect you in your early stages of trading unless you let it anyways. I Hope this video was helpful If you have any questions for me, the other zip traders, or anything that you need help with, don't forget to comment below or reach out to us on our zip trader circle Facebook Group Have a great day folks and I'll see you in the next video.