Hi,
I’ve spent some time developing with alpaca in a paper account and would really like to go live. However, the PDT rule is blocking this. I understand the PDT rule, so I’m not here to question that. But I’m wondering if switching the margin setting can help in my scenario.
Let’s say I have £1000 (UK user) to play with. I want to execute day trades at about £30 each, then sell once the trade becomes profitable.
So in my scenario, I start with £1000, invest £30, my account cash is then £970. Once I sell the trade, my account cash remains at £970 for 48 hours.
I’m more than comfortable waiting 2 days for the cash to clear before re-using it.
However, if I repeat day trades multiple times per day. I get into a scenario where my account has cash in it which I can’t spend as I’m classed as a pattern day trader.
Can this be bypassed somehow with the margin settings? I just don’t want any margin applied.
Thanks
@Mathewrimmington The Pattern Day Trading rules apply to all ''margin" accounts and are based upon the account type and not whether one actually uses margin. All Alpaca accounts are currently “margin” accounts so therefore the PDT rules currently apply to all accounts (regardless if margin is used or not). So no, the PDT rules cannot be bypassed. Essentially, one cannot day trade if one has less than $25,000 equity in an Alpaca account (technically $25,000 in ‘securities equity’ which excludes any crypto holdings). There are some exceptions (ie one can place 3 day trades within a rolling 5 day window) but those are really meant to be just ‘exceptions’. There is a SEC brief on this regulation here.
Hi Dan,
Thanks for getting back to me so quickly.
It’s a shame that Alpaca don’t allow a cash account solution to solve this problem.
I know that my account is small fry and that you’ll likely have a lot of happy users who are happy to stick 25 grand in their accounts. But I’m not going to be able to do that.
If I can influence one thing here, I’d urge Alpaca to make a change and provide cash accounts. Without this it simply makes Alpaca unusable for beginner traders.
Mat
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@Mathewrimmington Cash accounts are definitely on the roadmap. They are requirement to begin offering US ‘tax free’ accounts like IRA and 401K accounts. And now with settlement changing from T+2 to T+1 the timing between selling and having funds credited is only one day which reduces some of the downside to a cash account.
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Ooh that’s good to know about the roadmap, thanks. The change would certainly keep me using Alpaca. Do you have any idea of timeframes? I’m not asking for a set date to hold Alpaca to it or anything, just a rough idea so I can adapt my development plans.
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