New Fed Rules – Take Note

by HSeldon2020

It used to be that if you were a PDT (Pattern Day Trader) and fell below 25K, you could switch your account over to have 3 day trades every 5 days, and still have margin (2X). You were allowed to do this three times a year. Or if you ran out of Day Trades, you could wait 90 days and get them back again.

Or you could fall below 25K and still trade, but not Day Trade, keeping your margin intact (4X Buying Power).

However, now the new rule is – If you are a PDT and fall below 25K, you cannot trade. You can ask only 1 time to be given the 3 day trades every five days, but that is it, 1 time – forever. Otherwise, if you fall below the 25K you either have to put more money in, or you have to switch your account over to a cash-settled account. Then if you ever want to be a PDT again and go back over 25K you need to apply once again for margin with the broker (right now, if you fall below 25K you can continue trading and once you go over 25K your account automatically switches you back to being a PDT).

So if you are hovering around 25K and fall below it, closing the day out below it, be prepared to have your account frozen, unable to trade (I am sure you can close trades but that is it), unless you either get it back over 25K or you switch to a cash-only account.

They (the Fed) claim this is because of all the MEME stock trading, and the ability to wait 90 days until you can Day Trade again – that every three months they would see a huge spike in activity causing a lot of volatility – so naturally they wanted to protect traders from themselves (because they just care sooooo much).

Anyway, you should all be aware of this. I think I got this all correct, typing quickly and it was a phone conversation I had with Ameritrade so hopefully I relayed it all accurately.

Best, H.S.