Are you aware of the pattern day trader rule? If you use a margin account with less than $25,000 and execute four or more day trades in a five-day period, you are at risk of being labeled a pattern day trader (PDT) and may have your account temporarily suspended. But don’t worry; your bot can be set up to avoid this situation automatically.
This video tutorial demonstrates how to use a decision recipe to prevent you from entering and exiting trades on the same day. The recipe can reference how long a position has been opened as a safeguard against intraday trades. You can set the time frame to less than one day, and the automation will only proceed down the “Yes'' path if the position has been open for more than a day. If not, the automation simply ends and will not initiate a closing position action until the criteria for trade duration is met.
We all love to trade. And in all the excitement, we may lose track of our daily position count, leading to unintended consequences from the SEC. The bots are here to help alleviate the fear of overtrading in a small account. With a little forethought, you can create bots that keep an eye on your trading limits, so you don’t have to stress about your portfolio.
Listen to episode 45 of the Option Alpha podcast to learn more about the pattern day trader rule: Pattern Day Trading Rules – What Are They & What Can go Wrong?