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Known as one of the top online brokers, Fidelity offers commission-free trades on stocks, ETFs, and more along with a myriad of other features. But, can you day trade on Fidelity?
You can day trade on Fidelity. However your account must be a cash account so that way it is not subject to the PDT rules.
If you have a margin account and it has under $25,000 in it you will run into the PDT (pattern day trader) rule which means you won’t be able to make more than 4 day trades in a rolling 5 day period.
The PDT rule applies to all brokerages (not just Fidelity) so they will all have similar rules on their account. However if you have a cash account then the PDT rules won’t apply.
You can also spread your money out over a few different brokerages and day trade on each one a couple times a week if you don’t want to use a cash account.
If you want an idea of what day trading on Fidelity looks like, where it shines and where it’s lacking then continue reading.
Can You Day Trade on Fidelity?
With day trading being such a popular investment style, it’s important to find an online broker that not only allows day trading but is set up to help day traders thrive.
In this case, Fidelity tends to fall short. Here’s why:
Pattern Day Trading Rule
Because they operate in America, Fidelity (and all other USA brokers) must adhere to the pattern-day-trading rule.
What this means is you won’t be able to day trade regularly unless you have at least $25,000 in your account.
This requirement doesn’t apply to those with a cash account instead of a margin account though. So for most people that means you either need to set up multiple margin accounts with multiple brokers and rotate your trades or you need to have a cash account instead.
Additionally, you can place 3 or fewer trades in a 5 business day time interval to avoid being labeled as a PDT or a pattern day trader.
If you’re labeled PDT without $25,000 in your margin account, your ability to make future day trades becomes limited by the broker.
A lot of day traders ignore this and continue placing orders and selling stocks on a daily basis only to have their Fidelity account restricted or suspended, so I don’t recommend doing this.
As mentioned earlier this applies to all brokers not just Fidelity so you will face this issue with day trading on all brokerage accounts.
Active Trader Pro
This is Fidelity’s premium trading platform product that is available automatically to users who trade more than 36 times in a rolling 12 month period.
With both a desktop and mobile app, Active Trader Pro is advertised as a dynamic trading platform that offers:
- Customizable tools to help you trade
- Portfolio monitoring
- Full-screen charting on desktop app
- Level II quotes
- Market tracking
- Financial news and other research resources
..and more. While all these features are great, there’s a few things lacking when it comes to using ATP for day traders:
- Only 7 indicators available on the mobile app (the industry average is 30+)
- Speaking of the mobile app, it can be slow and experience lag at times
- Level II data for over-the-counter stocks is almost non-existent making it next to impossible to identify instant trading opportunities for these stocks
- The ticker in the Quote tool lacks float size data
- No hotkeys, VWAP indicator, paper trading simulator or alerts premarket and after-hours
Limited Ability to Practice Trade
If you’re just getting into day trading or honing your skills, it’s important to be able to practice trading before actually putting real money on the table.
A lot of online brokers offer demo accounts with most, if not all, of the platform’s regular functions to allow you to simulate real trades without risking any real money.
While Fidelity’s Active Trader Pro has a demo mode, a lot of the features from the actual platform are not available.
Should I Use Fidelity To Day Trade?
With all of the limitations in place, specifically the lack of functions on the ATP, I wouldn’t really recommend Fidelity for day traders.
Since all brokerages will have the same rules for PDT then it really comes down to how helpful Fidelity’s software and app is to your trading and in my opinion there are far better ones out there.
Best Fidelity Alternative For Day Traders
If you’re a day trader looking for an online trading platform, I’d recommend giving TD Ameritrade a try.
They offer a similar platform to Active Trader Pro called ThinkorSwim, which has a lot more features to help you trade.
The platform is highly touted by day traders for its enhanced speed and functionality; allowing users to enter a new stock and submit an order within seconds.
On top of that, ThinkorSwim has a simulation account with all of the platform’s regular features including the ability to buy and sell currencies and futures.
What Is Day Trading?
Day trading refers to the act of buying and selling a stock or option on the same trading day.
With the rise of online trading platforms, day traders have grown by leaps and bounds in recent years.
However, restrictions on day trading do make it difficult to day trade on brokers like Fidelity and Robinhood with margin accounts so you will likely have to use a cash account and wait for the money to settle before using it again.
Who Is Fidelity For?
Fidelity is ideal for casual investors or long term investors.
The online broker can be an ideal place to start for beginners as they require no money to open an account and $0 commission trades on stocks, ETFs, and mutual funds.
What Is A Pattern Day Trader?
A pattern day trader is someone who is trading with a margin account 4 or more times in a rolling five business day period.
Under this rule, pattern day traders must have a minimum equity of $25,000 in the margin account on any day the user day trades. If the account falls below $25,000 the user will not be permitted to day trade until the account is restored to $25,000.
So..can you day trade on Fidelity? Yes, but with some caveats
As I covered in this article, if you don’t maintain a balance of $25,000 in a margin account, you will be labeled a PDT and be limited to 4 day trades in a 5 business day period.
The question you should be asking though is “should I day trade on Fidelity?”
Given the PDT rule and the lack of features on Active Trader Pro — no hot keys, VWAP indicator or access to level II quotes for OTC stocks — day traders might be better off with a different online broker.