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How to Start Trading With An Account Under 25k
Written by Blake Levison
When your'e just beginning to trade, you might not have $25k in your margin account. It can be a little hard to successfully trade in that situation because of the PDT rule, but don't worry, there are a few ways around it and some very helpful tips and tricks that we will share with you.
What Exactly is The PDT Rule?

The pattern day trader rule doesn't allow traders with less than $25k in their margin account make over three day trades in a rolling five day period. This rule is dreaded by many but there are a few things that you could do to still be a successful trader and grow your trading business.
Having A Cash Account

With a cash account, you can make as many trades as you'd like, even with an account under $25k. The PDT rule doesn't apply to you if you have a cash account. However, having a cash account has its cons. You have to trade with settled cash. The SEC's cash settlement rules state that when you convert assets or liquidate a position in your account, you can't use the cash for two whole days after the day of the transaction.
This makes cash accounts perfect for those who aren't looking to make income or for the beginners that just want to learn and use real money. At least with a cash account you won't have to worry about the PDT rule. Whether you choose to have a cash account or a margin account depends on what you are looking for and what your trading strategy is. 
Multiple Brokerage Accounts

Another trick to make more than three trades a week is to open multiple brokerage accounts. With two brokerage accounts, you can make six day trades per rolling five day period. Add another one and you can make nine! This is something that many professionals and educators recommend, but you need to be careful when opening multiple accounts. 
If you are working with a very small sum of money, this strategy might not be right for you because you would be splitting your money up into even smaller amounts. This could result in a slower gain rate. It would just be smarter to have one account with all of your money. If you have a little more money to work with, an amount closer to $25k, then you should definitely consider having multiple accounts. Commission free trading is now offered by many brokerages so that isn't something to worry about. You can enjoy the benefits of no commission and trade more by using this strategy.
There is one more issue with opening multiple brokerage accounts that applies to every trader no matter how much money you have in your account. Keeping track of your cumulative positions will be difficult, and you won't be looking forward to tax season. You'll need to gather lots of documents and you'll find yourself struggling to stay organized. If you think that you can handle keeping track of everything, then this isn't something to worry about but still something to keep in mind.
Using Offshore Brokers

If you use an offshore broker, you'll be able to avoid the PDT rule in addition to some other rules and regulations. Plus, by using an offshore broker you can also benefit from some extra leverage. Here's a list of the top offshore brokers out there:
  • Trade Zero
  • Capital Markets Elite Group
  • ​Trade View
There are a lot of brokers that you could choose from, but you should do your research and be careful with offshore brokers. All brokers are different and you should choose the one that matches your strategy and what you are looking for the most. Go through the features and make sure they're worth your time.
Another thing that you should not forget is that some of the restrictions that you're avoiding when you use an offshore broker were probable made for a reason, and sometimes for your safety. Pay even more attention than you normally should to all the paperwork that you will need to sign. Make sure that you understand all of the risks and know exactly what you're signing up for. Furthermore, the more known offshore brokers generally charge commission fees and subscription fees.


How To Be Successful With One Margin Account

If you don't want to try out these strategies, it's okay to just keep your one margin account too. In fact, having one brokerage account and having to follow the PDT rule might help rookies. Beginners who don't have much experience will learn from the PDT. The rules can serve as discipline. Also, you might not be very good at trading right away and the limit will stop you from losing too much. Even if you can not avoid the PDT rule, you can still do little things to maximize what you have and make the most out of it. Staying away from mistakes and keeping a few things in mind can go a long way.

Here's an important tip:

Always stick to A+ setups. Strong setups are essential, and that's something all traders should know. A common mistake to avoid is holding trades overnight. It may be tempting sometimes, but don't do it. When holding overnight, you're risking a lot and you can't control the next day's open. Just avoid this risk all together even if it means using a day trade. 
When trading, always take your time frame into consideration. If you have under $25k in your account, you can only make 3 trades per week. So why would you trade on a short time frame? Trade on long term intraday charts instead. Obviously things will move slower, but that isn't a bad thing at all. You'll be using your three trades wisely if you aren't trading on a short time frame.


To Conclude

Even if you have a brokerage account with as little as $500, you could still trade and make more and more money. Sure, every strategy has some cons but the pros tend to overpower them. Just take your time and go through all of your options. We're sure you'll a way to trade that works for you.

About Author: 
Blake Levison

Blake Levison is a full-time technical stock trader. Blake's favorite style of trading is a combination of share trading, scalping, and swing trading. Blake is a very big on selling covered calls and is obsessed with stock trading!

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