The 3 day trade limit is a unique restriction that FINRA implemented in 2001. It is a safety feature that helps brokers lower the risks linked to day trading. Once you have a PDT account, you’re required to have an equity of at least $25,000.
For more on the 3 day trade limit, please read on.
How does the 3 day trade limit work?
The 3 day trade limit stipulates that if you have $5,000, you can make 3 day trades in 5 days. And if you ignore this rule and make a 4th trade, then the broker will freeze your accounts for about 90 days. Or you can increase your equity to over $25,000.
But if your equity exceeds $25,000, then the 3 day trades a week limit doesn’t apply to you.
Can you make profitable trades within only 3 day trades per week?
Yes, any trader can make a profit even from a single trade. So provided you have a reliable strategy and are willing to be patient, you can still make profitable trades even with the 3-day trades rule. The 3 day trades in 5 days rule gives you more purchasing power of 4:1.
Mastering the 3 Day Trades a Week Rule for Long Term Strategy
With a high purchasing power and an account of $25,000, you’ll have a purchasing power of about $100,000. Unfortunately, you can only use this cash for day trading and never hold a position overnight. Another thing to consider is always closing the previous day with a balance of over $25,000.
How to maximize your profits with the 3 day trades?
Since you’ll be working with 3 trades in 5 days; stay away from penny stocks. Instead, invest in other top stocks that trade in huge volumes. For better results, focus on 1 or 2 of the most volatile stocks at any given time.
Why the 3 day trade limit is good for traders?
The 3 day trading rule is there to protect traders working with equity of about $25,000. Basically, it’s there to prevent you from burning out your account while trading. And that’s because you’ll be limited to 3 trades in 5 days instead of the 4 to 5 trades other day traders make in a day.
