How To Remove Pattern Day Trader Status On TD Ameritrade (2024)

The Pattern Day Trader (PDT) rule, enforced by FINRA (Financial Industry Regulatory Authority), can put a damper on your day trading activities in a TD Ameritrade account. If you've been flagged as a PDT, don't execute another day trade until you understand the restrictions and explore your options for removal. This guide will equip you to remove the PDT flag from your TD Ameritrade account.

Understanding the PDT Rule

The PDT rule classifies an account as a PDT if it executes day trades (buying and selling the same security within the same trading day) on more than four days in five days over a rolling week period, provided the account also has less than $25,000 in equity (cash and securities combined).

Here's what being flagged as a PDT means for your trading:

• Day Trade Buying Power Restriction: You'll be limited to executing only day trades with settled funds (cash from previously sold positions). This significantly restricts your buying power for day trading.
• Potential Margin Call Risk: If your buying power falls below a certain threshold due to unsettled trades, you might face a margin call, forcing you to sell holdings to meet the minimum requirement.

Removing the PDT Flag from Your Account

• One-Time Courtesy Removal: TD Ameritrade offers a one-time courtesy removal of the PDT flag. Contact their customer service to request this removal. However, remember that future day trading activity exceeding the PDT limits will trigger the flag again, and this courtesy won't be available again.
• Increase Account Equity Above $25,000: If you maintain a minimum equity of $25,000 in your account, you can effectively bypass the PDT restrictions regardless of your day trading frequency. This option requires a significant capital injection.
• Switch to a Cash Account: A cash account only allows you to trade with settled funds, eliminating the possibility of violating the PDT rule altogether. However, you'll lose access to margin buying power, which can amplify your returns (and losses).

Choosing the Right Path

The best option for removing the PDT flag depends on your individual trading goals and risk tolerance. Here's a quick breakdown to help you decide:

• Occasional Day Trader: If day trading is a small part of your strategy, consider requesting the one-time courtesy removal. Just be mindful of the PDT limits in the future.
• Frequent Day Trader with Limited Capital: Switching to a cash account might be the best option to avoid restrictions. However, be prepared to manage your trades with only settled funds.
• Frequent Day Trader with Sufficient Capital: Maintaining an account balance above $25,000 allows unrestricted day trading while keeping margin buying power as an option.

Remember: Day trading is inherently risky, so ensure you have a solid trading strategy and risk management plan in place before diving back in.

Conclusion

The PDT flag on your TD Ameritrade account can be a temporary hurdle. By understanding the rule, exploring your removal options, and carefully considering your trading goals, you can make an informed decision to get back to trading on your terms. Remember, responsible trading practices are key to long-term success, regardless of your day trading frequency.