Vanguard 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 Vanguard allow on cash account.

Vanguard Pattern Day Trading

Do you want to day trade at Vanguard? Do you have $25,000 to deposit in your account? If you answered yes to the first question and no to the second, don’t fret. You can still day trade as long as you follow our blueprint. Keep reading.

How Many Day Trades Does Vanguard Allow

America’s pattern-day-trading rule originates with the Financial Industry Regulatory Authority. FINRA promulgates the regulation, and member firms are required to enforce it. Vanguard is a member firm; so if you have a brokerage account there, you’ll need to follow the guidelines.

And what exactly does the rule say? Any account that meets the description of pattern day trading must have account equity of $25,000 or more.

And what is the definition of pattern day trading? Here it is:

An account with margin privileges that executes 4 or more day trades of stocks in 5 business days with those trades making up over 6% of said account’s entire trading activity.

The details of this one sentence are pretty important. If your account does not meet any part of the rule, you don’t need to worry about the $25k requirement.

Strategies to Elude the PDT Rule

In order to see the available methods of (legally) circumventing the PDT rule, we simply need to break down the definition of a PDT account into its multiple components:

“...with margin privileges...”

Only margin accounts can be classified as PDT accounts. If you’re trading in a cash account, you won’t have to deposit $25,000. You do need to be aware that day-trading activities could be stifled in a cash account, though.

For instance, you won’t be able to day trade with unsettled funds, and it takes two business days for funds from stock trades to settle.

“...4 or more day trades...”

To avoid PDT classification, you could simply place 3 day trades per week, and no more. At this level of activity, the securities regulators aren’t worried about protecting you from the market or yourself.

“...of stocks...”

Somewhat surprisingly, day trading restrictions only apply to equity trades. You can day trade other financial instruments, such as options, without restrictions.

Vanguard offers options trading. Although it doesn’t provide advanced tools or strategies, it is possible to buy and sell calls and puts intraday.

To enable your investment account at Vanguard for options trading, point your browser to this link and fill out the options application. You will need to login first. The document is available in both pdf and electronic formats.

“...making up over 6%...”

Although this one is harder to follow, it could still be useful for some traders. If your day trades make up less than 6% of your total trades, the PDT rule does not apply. You’ll have to have a lot of other trades to keep your day trades below this level.

Final Idea

It’s also possible to day trade futures contracts and cryptocurrencies without the PDT restriction. While Vanguard doesn’t offer these products, other firms like tastyworks and TD Ameritrade do.

Alternative For Traders

For active traders a good alternative broker is Webull. It has a number of advantages over Vanguard: $0 commissions on options trades, lower margin rates, virtual trading, and advanced trading tools.


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