All things being equal, you can day trade in any type of investment account, including in an IRA. However, government and regulatory agencies set parameters around day trading activity in general. These rules and guidelines directly impact your ability to day trade stocks, options and other types of securities. Failure to comply can lead to account restrictions. Because you cannot borrow funds using margin in an IRA, additional special circumstances apply.
The Financial Industry Regulatory Authority (FINRA), considers the purchase and sale of a security in the same day a day trade. As the FINRA website notes, traders who execute four or more day trades in five business days get slapped with the "pattern day trader" designation. This trading activity must account for more than 6 percent of your overall trading activity in that five-day span. These definitions apply to IRAs as well as regular taxable accounts. As such, you could make periodic day trades in an IRA, without going over the limit, and face no consequences.
If you become a pattern day trader by executing four or more day trades in a five-business-day period, FINRA requires that you establish and maintain a $25,000 minimum balance in your account. You can meet this requirement in your IRA using your cash balance, the value of securities you own, or a mix of both. For instance, if you have a $12,500 cash balance and $12,500 worth of XYZ stock, you meet the minimum requirement. If, however, XYZ stock declines in value and you take no other action to maintain the $25,000 minimum, you violate FINRA's rules.
If your account balance drops below $25,000 once your brokerage has labeled you a pattern day trader, you will not be able to day trade until you reestablish that minimum balance. You will need to deposit cash, transfer holdings from another account or hope that any securities you hold in your account increase in value to achieve the $25,000 balance and lift the day trading restriction.
If you day trade, you probably do it in a margin account, where you can borrow funds to trade on from your brokerage, using eligible holdings in your account as collateral. This prevents you from committing settlement violations in your account. Generally, you commit a settlement violation when you sell a security prior to paying for it. You can read complete details about settlement violations at Charles Schwab's website. In a nutshell, when you purchase a stock, for instance, the funds you used to make that purchase settle three days after the trade. If you sell that stock before the funds have settled, you have committed a settlement violation. These violations can lead to trading restrictions on your account.
IRA Special Circumstances
Margin accounts, generally speaking, eliminate most types of settlement violations, but you cannot trade on margin in an IRA. Some brokerages, however, offer special types of IRA accounts to get around that problem. Interactive Brokers, for instance, had an "IRA margin account." Don't let the name confuse you, as it is misleading. You are not actually borrowing money to trade on margin in this account; rather, the brokerage structures the account in such a way that you can immediately trade on unsettled funds. This account feature facilitates day trading in an IRA without the need for margin borrowing and without the worry of settlement violations. In this type of account you cannot short stocks or do anything else that requires your broker to loan you funds on margin.