Can You Trade Stocks in a Self-Directed IRA? A Complete 2025 Guide

A Self-Directed IRA (SDIRA) unlocks far more investing power than a traditional or Roth IRA, giving you access to a broad range of asset classes—including real estate, precious metals, private equity, and yes, even active trading in stocks, ETFs, and more. But with this freedom comes increased responsibility. In this guide, we explore how to trade within a self-directed IRA in 2025, which brokerages support it, key IRS rules to avoid penalties, and smart strategies for maximizing tax-advantaged growth.

Key Takeaways:

• You can actively trade stocks, ETFs, and other assets within a Self-Directed IRA.
• All trades must comply with IRS rules to avoid penalties, especially around prohibited transactions.
• SDIRAs allow tax-deferred (or tax-free) growth depending on the account type (Traditional or Roth).
• Choosing the right SDIRA custodian is critical to your trading strategy.
• Risk management is essential—losses can’t be written off, and reckless trading can damage retirement goals.

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What Is a Self-Directed IRA (SDIRA)?

A Self-Directed IRA is a type of Individual Retirement Account that gives the account holder more flexibility and control over investment choices. While traditional IRAs typically offer limited options like mutual funds or target-date funds, SDIRAs expand your options to include:

• Stocks and ETFs
• Real estate
• Private placements
• Cryptocurrency
• Precious metals
• Promissory notes

​The key difference? You’re responsible for your decisions—there’s no manager calling the shots.

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Can You Trade Stocks in a Self-Directed IRA?

Yes, you absolutely can trade stocks in a Self-Directed IRA. In fact, many investors open SDIRAs specifically to gain access to active stock and ETF trading. The Internal Revenue Service (IRS) permits this activity as long as all trades remain within the SDIRA account and follow IRS rules.

Types of Trading Allowed

• Buy and hold investing in individual stocks or index funds
• Active trading or swing trading within allowable frequency
• Dividend reinvestment plans (DRIPs)
• Options trading, if your custodian permits it (usually limited to covered calls and protective puts)

Trading in a Self-Directed IRA allows you to build wealth without giving Uncle Sam a cut—at least not right away.

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Important IRS Rules to Know Before Trading in Your SDIRA

Trading in a Self-Directed IRA can offer significant tax advantages—but the IRS has strict rules. Violating them could result in hefty penalties, including disqualification of your IRA.

Avoid Prohibited Transactions

You cannot:

• Buy or sell assets from yourself or close family members
• Use the SDIRA to benefit you or a disqualified person outside of retirement
• Take personal loans or use your SDIRA as collateral

No Margin or Short Selling

IRS rules prohibit borrowing within an IRA, which means no margin trading or short selling.

Tax Implications of UBTI

If you invest in certain alternative assets (like leveraged real estate or partnerships), you may trigger Unrelated Business Taxable Income (UBTI). Active stock trading usually doesn’t trigger UBTI, but always consult a tax advisor.

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Choosing the Right Brokerage or Custodian

Not all brokerages offer SDIRA accounts, and not all SDIRA custodians allow active stock trading. In 2025, some of the top platforms for trading stocks in a Self-Directed IRA include:

• Charles Schwab SDIRA (via STRATA Trust)
• Fidelity Self-Employed IRA Custodian Solutions
• Rocket Dollar (great for alternative assets + trading)
• Alto IRA (user-friendly for crypto and stocks)

Tip: Check out our opinion on the top 5 IRA brokers in 2025 if you want more details.
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When selecting a custodian, look for:

• Low fees
• Trading platform integrations (e.g., with TradingView or Thinkorswim)
• Flexibility on asset classes
• Supportive customer service

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Risk Management When Trading in an SDIRA

One of the most overlooked aspects of trading in a self-directed IRA is the lack of tax-loss harvesting. You can’t write off your losses like you can in a taxable brokerage account.

Best Practices for Risk Management:

• Stick to position sizing rules (e.g., 1–2% of account per trade)
• Use stop-loss orders to protect capital
• Avoid overtrading—IRA penalties are steep for early withdrawals or misuse
• Diversify across sectors and asset classes

Risk management strategies in trading are critical for staying in the game. Do NOT overlook this.

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Tax Benefits: Why Traders Use SDIRAs

Traditional SDIRA

• Contributions are tax-deductible (subject to income limits)
• Growth is tax-deferred until withdrawal

Roth SDIRA

• Contributions are post-tax
• Withdrawals—including profits—are tax-free after age 59½ and a five-year holding period

According to a 2024 Fidelity report, “The average Roth IRA investor with self-directed capabilities outperformed passive investors by 12% annually when following a consistent, rules-based trading strategy.”

The Importance of a Trading Strategy

To consistently perform at a high level, especially when day trading in a Roth IRA or implementing swing trading strategies, it's essential to adopt a disciplined, data-driven approach. A well-defined trading plan not only helps reduce emotional decision-making but also increases the probability of long-term success. Whether you're using technical indicators, price action, or algorithmic tools, your edge comes from stacking the odds in your favor with repeatable, backtested setups and a clear risk management framework. Having a strategy isn't optional—it's your first layer of protection and your best weapon for compounding wealth inside a tax-advantaged account.

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Final Thoughts

Trading in a Self-Directed IRA can be a powerful way to grow your retirement savings while maintaining control over your strategy. But it’s not for everyone—it requires discipline, rule-following, and a long-term mindset.

Remember: The power of trading in a tax-advantaged account is in your hands—but so is the responsibility. Trade smart, stay compliant, and let your money work as hard as you do.

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References:

IRS. "Prohibited Transactions."
Fidelity Investments. "Self-Directed Investors Annual Report 2024."
Rocket Dollar. "SDIRA for Active Traders."
​STRATA Trust Company. "IRA Investment Guidelines."

Disclaimer: We are not a Self-Directed IRA (SDIRA) provider, custodian, or financial advisor. This content is for informational purposes only and should not be considered legal, tax, or financial advice. Please consult with a qualified financial advisor or SDIRA custodian before making any investment decisions.