TD Ameritrade pattern day trading rules and active trader requirements. Margin buying power limits, and $25,000 minimum equity balance PDT restrictions. How many day trades does TD Ameritrade allow on cash account.

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TD Ameritrade Pattern Day Trading

Anyone who day trades has probably run into the SEC’s rules and restrictions on pattern day trading. These rules can be fairly restrictive and in some cases can result in a hold being put on your account that restricts your trading for a few months. For these reasons alone, any active trader should be aware of what these rules are and how TD Ameritrade enforces them across its accounts so that the restrictions can be avoided.

How Many Day Trades Does TD Ameritrade Allow

FINRA defines a day trade as any position that is bought and sold (or sold and bought) on the same day in your account. A pattern day trader is defined as anyone who places four or more day trades (of stocks, options, ETFs, or other securities) in their margin account over any rolling 5-business day period.

PDT rule does not apply to cash accounts. Therefore, TD Ameritrade allows unlimited number of day trades on cash accounts.

On margin account with under $25,000 balance you are allowed 3 day trades within 5 trading days period. On margin account with over $25,000 balance you are allowed unlimited number of day trades.

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What Are The Day Trading Rules?

For anyone that is flagged as a pattern day trader, TD Ameritrade requires that you maintain a minimum day trading equity balance of $25,000 (which includes marginable and non-marginable securities) on any day in which day trading occurs.

A Day Trading account with TD Ameritrade will enable you to day trade up to four times the amount of the equity in your account, less the SRO (Self-Regulatory Organization) requirements, which are generally equal to 25% of the value of your long positions and 30% of the value of your short positions. This calculated amount is referred to as your day trade buying power.

What Happens If You Break FINRA’s Day Trading Rules?

If your account is flagged as a pattern day trading account and your equity balance falls below the minimum required $25,000 TD Ameritrade will issue a day-trading minimum equity call to your account. If you place a day trade in your account before restoring the minimum required equity, your account will be restricted to cash trades only for the next 90 days, or until the equity balance is brought back up to $25,000.

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What Happens If Your Day Trades Exceed Available Buying Power?

If your account exceeds your day trade buying power at any point during the day, your account will be issued a day trade buying power call, which will result in your day trading buying power being immediately restricted to two times the SRO calculations for the next five business days. If the buying power call is not met within these five business days, the account will be restricted to trading only long positions on a cash-available basis for 90 days, or until the call is met. Multiple day trade buying power calls will result in a cash restriction on your account no matter when you meet the calls.

How to Avoid Calls and Restrictions

If your account is flagged as a patter day trader you should closely monitor your equity balance and positions to ensure you meet at least the minimum $25,000 requirement, plus any additional equity that might be needed to cover larger or more volatile positions. If you do find yourself facing a day trade buying power call, you should deposit the additional required funds immediately to bring up your equity balance (or reduce some of your positions) in order to avoid the penalties discussed here.

Does Ameritrade Charge Day Traders any Fees?

TD Ameritrade doesn’t charge you any additional fees for having your account flagged as a pattern day trader, but you will be subject to their existing margin rates if you choose to use your day trading buying power in excess of your equity balance.

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