Can I Day Trade With a Cash Account

If you just go around to sign up for an account with a trusted broker, you would’ve noticed that there are several different options for opening an account. Having a cash account for your trading activity is one such account.

However, a single Google search might make you look past this option. Why? Because when you search for terms like “Can I day trade with a cash account” or “Day trading cash account rules,” you’ll see that day trading via a cash account is prohibited.

So, does that mean that the day trading rules cash account don’t matter?

Well, yes and no.

While you can’t day trade in the traditional sense using a cash account, you can execute day trades within certain limits. Let’s take a look at the cash account day trading rules and tips that can help you circumvent FINRA’s restrictions.

Here’s how you can day trade even with a cash account.

Day Trading with a Cash Account: Rules and Strategies

As we mentioned earlier, you can’t day trade in the conventional sense with a cash account. Because FINRA prohibits it. But what do we mean by day trading in this context? Well, a pattern day trader, as per FINRA, is someone who day trades at least 4 times in 5 business days via one account.

This trading activity must also reflect at least 6% of their total trading activity on that platform. Pattern day traders must also have at least $25,000 in their margin trading account at any time to be able to trade.

But, are cash accounts subject to PDT rule? No.

Wondering “Can I day trade with a cash account?” Well, yes, if you stick to these basic rules and strategies:

  • You can’t become a pattern day trader, but you can day trade, remember that.
  • Since you’re using a cash account, you’ll have to wait for your trade to come through before you can reuse the amount invested in the previous trade.
  • For stocks, your amount will be back within 2 days with the returns.
  • In the case of options, that time is one day.
  • Does pattern day trading apply to cash accounts? No. That’s why you can start without having $25,000 in your account.
  • Minimize risk, as always.
  • Only stake in as much as you can lose in a trade.
  • Exit a profitable trade there and then, don’t wait around.
  • And so on.

Hopefully, this answers “Can you day trade on cash account” and “How to day trade via a cash account,” let’s move on.

How to Successfully Day Trade with a Cash Account?

Now that you know the answer to “Can you day trade options with a cash account,” let’s see how you can do so profitably. Here are our top tips to help you use your cash account for day trading successfully:

  • Always have funds on the side for day trading.
  • Dedicate separate time for day trading.
  • Don’t jump higher than you can accord to, instead, start with baby steps.
  • Penny stocks are a big no-no for day trading.
  • Be sure to time your day trades perfectly.
  • Always limit your losses.
  • Manage your risks effectively.
  • Have realistic expectations about your profits.
  • Know when you can sell for the best profits.

What Are the Rules for Day Trading with a Cash Account?

Now, let’s take a look at the cash account no PDT rule and other rules associated with day trading via a cash account. Well, it’s hard to phrase it this way — cash account trading rules — because, as we mentioned earlier, FINRA does not allow day trading via cash accounts.

But if you’re insistent to pursue day trade in cash account, you can do so as long as you don’t fall into the pattern day trader category. While the PDT rules don’t apply to cash accounts, it’s best to steer clear to avoid any trouble.

Here are some basic rules or principles you must keep in mind when day trading through your cash account:

  • All trades are to be paid in full when executing.
  • You must cover the cost of your trades with your own money (thus the name).
  • When you execute a trade, by leveraging your money, you can’t use that money again until your trade is processed.
  • The number of day trades you can execute will be limited by your account balance.
  • You can’t borrow any money for your trades, unlike in a margin account.
  • All other limitations of a cash account also apply.

Cash Account Trading Rules You Need to Know

Now that you know how to day trade with a cash account, let’s explore the basic trading rules that go along with cash accounts:

  • Any trade you execute may take around 2 business days to settle.
  • As a cash account holder, you can’t borrow any money for your trade.
  • You can’t short-sell any stocks via your cash account.
  • Only the settled cash can be used for trades.
  • You can’t sell securities before the previous trade settles –this is a violation of the cash account terms and conditions.
  • There is no way to use cash that is yet to be settled for any trades.
  • You will have to stay true to any minimum account balance requirements.
  • FINRA’s regulations don’t allow traders to pattern day trade with cash account.

If you’re not okay with these rules and restrictions and would rather day trade without restrictions, then having a margin account is the way to go. In this case, you’ll have to abide by the PDT rules but other than that, you’re free to day trade.

Top Strategies for Day Trading with a Cash Account

If you’re planning to day trade options cash account, good luck!

Just keep all the tips and strategies we shared in mind. To round up everything: always manage risk effectively when pattern day trading cash account, don’t overdo anything, and be realistic about your profit expectations.

Overall, day trading is riskier than some other options out there, but if you’re good at risk management and know your trade, you’re golden.

Well, that’s it, we hope it helps!



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