E*TRADE Day Trading and the PDT Rule
Owned by Morgan Stanley, E*TRADE is a cost-effective brokerage widely used by day traders. It provides various trading platforms, advanced tools, and paper trading options. Its competitive fees and broad selection of securities make it appealing for traders.
Read on to see if E*TRADE fits your trading needs.
Key Takeaways
• E*TRADE, under Morgan Stanley, attracts day traders with its competitive fees and extensive range of securities, including penny stocks, listed stocks, ETFs, ADRs, futures, and options.
• E*TRADE features multiple trading platforms, advanced tools, and options for paper trading.
• E*TRADE’s platforms include advanced functionalities like hotkey support, sophisticated charting, customizable layouts, a price ladder with Level 2 data, and enhanced order tickets.
• The Pattern Day Trader (PDT) rule at E*TRADE mandates that traders making four or more day trades within five business days maintain a minimum balance of $25,000. If this balance cannot be met, the account may face trading restrictions.
Day Trading Fees at E*TRADE
E*TRADE’s trading fees are low. There are no commissions for U.S.-listed stocks and ETFs, but other securities may incur fees. The costs vary depending on the type of trading activity.
Key trading fees include:
• OTC (including Pink Sheets): $6.95 per trade, or $4.95 for active traders
• ADRs: Charges range from $0.005 to $0.05 per security
• Options: $0.65 per contract, or $0.50 for active traders
• Futures: $1.50 per contract, per side (buy and sell)
Available Securities
E*TRADE offers a diverse selection of securities, catering to a wide range of day traders. Available options include penny stocks, listed stocks, ETFs, ADRs, futures, and options.
E*TRADE’s Tools and Features
Below are the main tools and features provided by E*TRADE for day traders.
Platform Choices
E*TRADE provides several platform options, each tailored to different trading preferences. Platforms include the website interface, the browser-based Power E*TRADE, and the professional-level E*TRADE Pro. These platforms offer increasing control over trading specifics.
E*TRADE Pro includes advanced features like hotkey capabilities, detailed charting, a customizable layout, a price ladder with Level 2 data, and an advanced order ticket for streamlined trade execution.
Additionally, two mobile apps are available, suited for day trading on the go. The more feature-rich app is Power E*TRADE.
Execution Speed and Quality
E*TRADE is known for its excellent execution speed and quality, completing most stock and ETF trades in just 0.11 seconds. Over 95% of trades are executed at or better than the National Best Bid or Offer (NBBO).
Charting
E*TRADE Pro offers the most detailed charting experience, but Power E*TRADE also provides ample features for day trading. Both platforms offer a range of built-in technical studies and multiple timeframes, although custom indicators are not supported.
Paper Trading
Simulated trading is essential for many day traders to test strategies and perform back-testing. E*TRADE supports paper trading for stocks, ETFs, and options across all its platforms.
Watchlists
Customizable watchlists allow traders to monitor their favorite securities closely, helping to spot trading opportunities quickly.
Live News Feeds
Live updates from Bloomberg TV are integrated into E*TRADE platforms, providing traders with real-time market news, crucial for making informed trading decisions.
Margin Rates and Requirements
To use margin features for day trading, an account balance of at least $2,000 is required. Trading with a lower balance is possible, but without the advantages of increased buying power or the ability to short sell until margin conditions are met.
Margin trading involves a fee based on the account size, the duration of the loan, and the base interest rate. Rates vary from 2.50% above the base rate for smaller accounts to 0.50% above for accounts between $250,000 and $500,000.
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Debit Balance
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Margin Interest Rates
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$250,000 - $499,999.99
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11.7%
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$100,000 - $249,999.99
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12.2%
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$50,000 - $99,999.99
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12.7%
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$25,000 - $49,999.99
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13.2%
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$10,000 - $24,999.99
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13.45%
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$0 - $9,999.99
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13.7%
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E*TRADE Pattern Day Trader (PDT) Limits
E*TRADE follows standard industry rules for day trading. The Pattern Day Trader (PDT) rule is especially critical to understand.
Under the PDT rule, a trader who executes four or more day trades within five business days is labeled a pattern day trader. This status requires maintaining a minimum balance of $25,000. Falling below this threshold triggers a margin call. If the required balance is not restored, trading restrictions could prevent purchasing securities for 90 days.
Alternative For Traders
For active traders,
Webull
is a strong alternative for day trading. It offers $0 commission on options trades, lower margin rates, virtual trading capabilities, and more user-friendly tools than E*Trade.
Open Webull Account
Open Webull Account
Updated on 8/6/2024.
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