Alpaca PDT limitation: Insufficient day-trading buying power, skipping order

General
1

When executing pair‐trading orders through Alpaca’s paper account, you need to simultaneously short and long one pair. During testing, the broker returned the error:

Insufficient day‐trading buying power, skipping order.

After investigation, it turns out that the paper account is a margin account type, so this error is triggered by the PDT rule.

PDT rule summary:

  • If, within a rolling 5‐trading‐day period, a single margin account makes 4 or more “buy and sell (or sell short and buy to cover) within the same trading day” transactions, it is flagged as a Pattern Day Trader (PDT).
  • Once the account is flagged as PDT, it cannot make a 5th (or further) day trade on that same day. Any attempt will generate the “Insufficient day‐trading buying power, skipping order” error.

Question: Pair trading is a well‐established arbitrage strategy—even using hourly or minute‐level data for execution. How can one work around this PDT limitation?

2

You should reach out to your broker for more on PDT rule, if it applies to you and how to manage your account if it is already flagged PDT. Generally, if your account if funded with > $25K, you should be fine.