Pattern Day Trading at Fidelity


If you want to day trade at Fidelity, but don’t have $25,000 to deposit in your account, keep reading. We’re going to show you how you can legally avoid this rule and day trade all you want with Fidelity’s software.

How Many Day Trades Does Fidelity Allow


Day traders in the United States must have at least $25,000 in any account that they use for day-trading purposes, unless they qualify for an exemption. This is an industry-wide policy that comes from the financial regulators. Although Fidelity is not the author of the rule, it is required to implement it. Thus, Fidelity customers who want to day trade will need to take notice of this important regulation.

The definition of a pattern-day-trading account is very clear:

- It must place 4 or more day trades of stocks, options, ETFs, or other securities in a week (or other 5-business-day duration).
- It must be a margin account.
- The number of day trades must add up to at least 6% of the account’s total trades.

Any account that does not meet all three attributes is not a pattern-day-trading (PDT) account and does not have to deposit $25,000.

General Strategy


Although the PDT rule is viewed as a nuisance by many day traders, it does have the advantage of providing several loopholes. You’re perfectly welcome by law to structure your trading to avoid meeting the definition of pattern day trader. If you do, Fidelity won’t require you to deposit $25,000 in your account.

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Ways to Bypass the PDT Rule


The first idea to avoid meeting the definition of a pattern day trader is to open a cash account instead of a margin account. Notice above that part of the definition of a PDT account is that it’s a margin account.

If you do decide to place your day trades inside a cash account, keep in mind that you won’t be able to trade with unsettled funds. Currently in the U.S., stock trades take two business days after the trade date to settle. So if you sold a stock or ETF on Thursday, funds wouldn’t be available until Monday.

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Another way to circumvent the PDT rule is to place 3 or fewer day trades per week. The PDT rule only kicks in at 4 trades or more; and it resets every 5 business days, so you’re free to day trade on a regular basis.

It’s also possible to avoid the PDT requirement by keeping the number of day trades below 6% of total trading activity inside the account. That would require a lot of regular trading; so most day traders won’t be able to use this loophole.

Alternative Broker For Traders


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

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