Sorry! But, there is no straightforward answer to the question: How many day trades can you make in a week? Multiple factors have to be accounted for based on the individual day trader. This article will discuss these factors and how you can work within these guidelines to trade daily without restrictions.
Day Trading Defined
Day trading is where a trader buys and sells the same asset (such as a stock, options contract, or futures contract) within the same trading day or session. Each purchase and sale made within the same day is considered one day trade.
Depending on the type of market, there can be some restrictions surrounding how many day trades can be performed within a given period.
Let’s review these specific day trading rules.
- Futures Commodity Market
The futures commodities market allows the purchase and sale of futures commodities (corn, wheat, oil) and futures equities (like the S&P 500 Futures (ES) and Nasdaq Futures (NQ)). To trade within these markets requires a margin account funded with the minimum limit and special approval to trade futures. As long as you have the funds for trading, there are no restrictions on the number of trades made within the day or week.
One valuable item about the futures market is that funds are auto-settled. Once the asset is bought and sold, the funds are made available to the brokerage account immediately to allow the trader to take another trade if they desire. So, in the case of futures, there is no limitation to the number of day trades permitted as long as the funded account can cover it.
- Forex Currency Market
The forex currency market is very similar to the futures market requirements. The forex market does require specific approval and a funded margin account to be available. As long the account is funded for each day trade, there is no limitation on the number of day trades.
- Stock Market (including Options)
The stock market differs in how many day trades can be made. Please note that this also applies to option contracts as well. A trader can set up an account as a cash or a margin account.
The trader must have the exact amount available to cover their options trades for cash accounts. If the trader uses a margin account, they could borrow money from their broker to cover the expenses for the trade.
When traders use a margin account, they are subject to the Pattern Day Trader Rule (PDT) if their account balance is less than $25,000. With the PDT rule, a trader can only execute 3-day trades within a rolling five-day period. So, a trader is restricted to 3-day trades in a week. Remember that a day trade is calculated by every trade executed.
For example, if you execute three different trades (buy and sell orders) on the same day. Then this is considered a 3-day trade. Violate this rule and risk your account being flagged and restricted from day trading (usually for 90 days). So proceed with caution.
However, with a cash account, there are no restrictions on the number of day trades that can be made given there is enough cash to cover the trade. Also, note that stocks take approximately three days to settle, so the funds can be released back to you. Options contracts are usually settled the next day. It is essential to understand when funds will be available again for cash accounts.
To summarize, with a margin account, you are limited to 3-day trades during a five-day rolling period if you have an account balance of less than $25k. With a cash account, there is no limitation on the number of day trades, as long as you can cover the cost of the trade.
Circumventing the PDT (Pattern Day Trader) Rule
Now that you have a general idea about the restrictions of the PDT rule. Let’s look at ways to circumvent the rule.
#1 – Trade with a Cash Account
The most effortless approach to circumvent PDT and still trade daily is to set up a cash account, especially if you have less than $25k. The drawback to this approach is that with a cash account, you are limited in what you can do (as you cannot short stocks with a cash account or do any form of advanced options like spreads and iron condors). However, you can purchase stocks and single-leg option contracts with a cash account.
#2 – Use Margin Account with Over $25K Balance
If you have over $25,000 to trade with, you can go straight to a margin account. However, if you are a new trader, you may want to be leery of trading with a lot of money until you have a proven strategy that works for you. So, you may want to start with a small amount of cash in a cash account.
#3 – Trade Monday, Wednesday, and Friday on Margin
Depending on their trading strategy, some traders successfully do a one day trade every Monday, Wednesday, and Friday. If you decide to do this, keep up with the number of day trades made on a margin account to ensure you are within limits. Many brokers have tools within their platform to keep up with the number of day trades executed during the five days.
See the example below where to add this in thinkorswim.
Next to ‘Account Info’, click on the button next to it and select to ‘Customize Gadget’.
Select ‘Day Trades Left’ and make sure it is added to the right pane. Click Ok.
#4 – Swing Trade Some
Another option is to day trade a little and swing trade more. Swing trading allows you to hold a trade overnight or to the next trading session. These are not counted as a day trade and would not violate the PDT rule. So, you can essentially buy shares of stock today and sell them anytime tomorrow, which would not be considered a day trade.
#5 – Trade the Other Markets
One other item to consider is to trade other markets not affected by the PDT rule, like the futures market or forex currency market. These are for advanced traders but are another option if you want to avoid the PDT rule altogether.
Summary – How Many Day Trades Can You Make in a Week?
The above article summarizes the restrictions around the number of day trades allowed in the various trading markets discussed. Whether you decide to trade in the stock market, there are ways to work around the current rules to allow you the ability to day trade as often as needed.
The students in our program trade options with a cash account value of less than $25k and are not affected by the PDT rule.
To Learn More
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”