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Pattern Day-Trader Rule Stopping YOU? What Should I Do?

Welcome to another episode on Hungry for Returns, where I answer your trading and investing questions.

If you have a question you want answered on the show in more detail, then click here.

Today we have a question from someone a bit younger getting started in investing. And I’m going to share with you some thoughts and insights about what to do.

Here’s the question:

“Hey, Sasha, my name is Josh. As a person in my lower 20s with equity well below the 25,000 needed to be a pattern day trader, which is my overall goal, is it smarter to invest long term or to swing trade?”

Well, you might have $15,000, or it could be $10,000. But your overall goal is to hit about $25,000 because you want to do day trading.

Pattern day trader rule limits you to a certain number of trades. Remember that’s on a per broker level if you have three brokers each one of them if you take $15,000, and I put $5,000 on each.

Now I get more trades on each and every single one of them. Anyways, that’s one thought to get away from that and trade more often. 

Successful Trader – Great Strategy  

Let’s look at the bigger picture.

You’re 23 years old, and let’s say you have $15,000 in cash. 

Do you swing trade, or do you long-term invest?

Well, I look at it like this. If you’re young, you’re probably going to be making more money anyway in the future.

That means that you’ll be able to feed this account with time. I would say take this $15,000 and put it into something that’s long term. And pretend that that money is almost gone.

If you want to trade quickly and trade more, then you could take the approach of getting multiple brokers.

But usually, with age, your income should typically go up depending on what kind of job you have. Typically it should slowly start to rise.

With time you can feed and funnel this little bank account and get it larger and larger. That way, you can hit your $25,000 pretty quickly.

Long-term Investing Strategy

The smarter approach for securing yourself is to have an excellent baseline. Having something long-term is very handy. Remember that a huge core of your long-term investment should be with long-term investments. Or a huge part of your investment should be into long-term things.

That’s something like:

  • long-term stocks 
  • long-term dividend ETFs 

Then you have a medium-term, which is swing trading. And then you have spec trades.

Day trading is more like speculative trading. I know it’s attractive because you could trade more often more frequently. However, it’s more speculative. It’s not usually with the core part of the majority of the money that most people use.

Warren Buffett doesn’t just trade 50 billion dollars every single day in and out in and out of a position. No, a lot of it’s sitting here in the medium-term section. The thing is that you want to allocate things accordingly.

Swing Trading 

As far as swing trading goes, you could swing trade, hold stocks for a couple of days or a couple of weeks. That’s an excellent way to avoid the pattern day trader rule if you want to be more active.

If you’re looking for an excellent solid foundation and if you don’t like a lot of risks, then put it into a lot of longer-term plays. Let that money grow and accumulate over the next few years through dividends.

And with the time you could continue to funnel more and more money into that account as you make more money from your job or other areas businesses, entrepreneurship.

Final Word

Hopefully, that gives you an excellent baseline and foundation and things to think about.

I know we have a goal, and we want to go after if we want to have a 25,000 in our account because of the day trader rule. Well, in that case, we want to reach it and achieve it.

But remember the core foundation – you always want to have a nice stable base. And a lot of that comes from longer-term investing and then the day trading part is the speculative part and the speculative trades.

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