How We Prevent PDT Violations

In Options Auto Trader, we help you stay compliant with the Pattern Day Trading (PDT) rule to prevent any violations. The PDT rule applies to accounts with less than $25,000 that trade stocks or index options, limiting you to a maximum of 3 day trades within a rolling 5-day period. In this article, we’ll explain how our system helps prevent PDT violations and what you need to keep in mind when creating your auto trader.

What Is the Pattern Day Trading (PDT) Rule?

The Pattern Day Trading (PDT) rule is enforced by the Financial Industry Regulatory Authority (FINRA) and applies to traders with less than $25,000 in their accounts who trade stocks or index options. If you place more than 3 day trades (buying and selling the same security within the same trading day) within a 5-day rolling period, you will be flagged as a pattern day trader and may face restrictions.

Who Does This Apply To?

• Accounts with a balance under $25,000.
• Traders trading stocks or index options.
• Traders placing more than 3 day trades in a 5-day period.

How Our System Prevents PDT Violations

To protect you from PDT violations, our system integrates with your broker to track your day trades and ensure you stay within the 3-day trade limit over a rolling 5-day period.

Here's How We Prevent Violations:

1. Real-Time Data from Your Broker: We receive real-time data from your broker regarding your current day trading status. If you are approaching or at your limit of 3 day trades, our system will be alerted.
2. Trade Blocking: If you’ve reached the limit of 3 day trades within a 5-day period, Options Auto Trader will automatically block any new day trades that could cause a PDT violation. This ensures you cannot execute trades that would lead to a rule breach.
3. PDT Awareness in Your Auto Trader: While our system helps prevent a PDT violation, it’s important for you to factor this in when creating your auto trader. Ensure that the frequency and trade exit rules you set do not result in excessive day trades.

Example:

If you've already made 3 day trades in a rolling 5-day period, our system will prevent you from placing a new trade that could potentially count as a day trade. This way, you stay compliant with PDT regulations and avoid any potential penalties or account restrictions.

What You Should Keep in Mind

Although Options Auto Trader helps prevent PDT violations, you should always consider the following when creating your auto trader:

• Be mindful of trade frequency: Avoid strategies that require frequent day trades if your account is under $25,000.
• Monitor your trade history: Stay aware of how many day trades you've executed in a 5-day period.
• Adjust your strategy if needed: If you're close to your day trade limit, consider modifying your auto trader's settings to avoid making trades that could lead to violations.

Conclusion

Options Auto Trader works with your broker to help prevent Pattern Day Trading (PDT) violations by tracking your day trade activity and blocking trades when necessary. While our system provides safeguards, it’s still important to factor in PDT rules when setting up your auto trader, especially if your account balance is under $25,000.

If you have any questions about PDT rules or need assistance with your auto trader, feel free to reach out to our support team for help.