Firstrade 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 Firstrade allow on cash account.

Firstrade Pattern Day Trading

In the United States, any brokerage account that meets the definition of a pattern-day-trading account must maintain a balance of $25,000 or more. This policy comes from the regulatory authorities, not Firstrade. But Firstrade must follow it.

So if you have an account at Firstrade and you plan to day trade, it’s important that you pay attention to this issue. Otherwise, you could see your account frozen for 90 days.

Thankfully, the securities regulators are kind enough to create several ways to bypass the rule.

How Many Day Trades Does Firstrade Allow

A pattern-day-trading account is a margin account that has at least 4 equity trades in a rolling 5-business-day period.

The Regulators Provide Several Techniques to Circumvent Its Rule

First off, if an account’s day trades don’t add up to 6% or more of the account’s entire trading activity for the same period, then it is excused from the definition of a PDT account.

Also, only margin accounts can be considered PDT accounts. Cash accounts are excused. So if you don’t want to worry about depositing $25,000 in your account, but still want to day trade, you can just open a cash account.

If you opt for this method, remember that you won’t be able to trade with unsettled funds, as you could in a margin account. For stocks, the settlement date in the U.S. is T+2. So if you sell something on Thursday, the funds wouldn’t be available for trading until Monday.

Another idea is to swing trade instead of day trade. In swing trading, you exit a position in less than two weeks after entry, but after the trade date. In day trading, you exit a position on the same day. Swing trading doesn’t have the $25,000 requirement.

The PDT rule only applies to equity trades. So you could day trade options at Firstrade. These can be bought and sold within the same day without violating the PDT rule.

FirstTrade Day Trading

To add options trading capacity to your Firstrade account, just login and click on “Service” in the top menu and select “Form Center.” Scroll down to the “Margin Account & Option Privileges Forms” section and click on “Option Application & Agreement.” Firstrade offers both hard-copy and online applications.

It’s possible to buy calls and puts and write covered calls and cash-secured puts at Firstrade without a margin account or any minimum level of equity. More advanced derivative trades will require margin and minimum equity levels.

Perhaps the easiest way to avoid the PDT rule is simply to place 3 or fewer round-trip day trades every 5 days. This will keep your account under the threshold, and you won’t be required to deposit $25,000.

A final method, although not necessarily the best method, is to open an offshore brokerage account. The PDT rule is an American regulation, and many foreign brokerage firms don’t have a day-trading minimum equity requirement, or they have a lower requirement. There are considerable risks with these brokers, however.


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