Understanding the Pattern Day Trader Rule in Day Trading
Learn what happens when you day trade four times in five days and the implications of being a pattern day trader.
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If you day trade four times within five business days in a margin account, you may be flagged as a pattern day trader. Pattern day traders are required to maintain a minimum of $25,000 in their account. If your account balance falls below this limit, your brokerage may prevent you from further day trading until the balance is restored.
FAQs & Answers
- What is a pattern day trader? A pattern day trader is defined as someone who executes four or more day trades within five business days in a margin account.
- What is the minimum balance for day trading? Pattern day traders must maintain a minimum balance of $25,000 in their trading account.
- What happens if I don't meet the minimum requirement? If your account balance falls below $25,000, your brokerage may limit your ability to day trade until you restore the balance.
- Can I day trade without being labeled a pattern day trader? Yes, you can day trade without being labeled a pattern day trader if you make fewer than four day trades in a five-day period.