What is the pattern day trader rule?

This is known as the Pattern Day Trader Rule, or the PDT Rule. These rules are set forth as an industry standard, but individual brokerage firms may have stricter interpretations of them. They may also allow their investors to self-identify as day traders. Consider the case of a pattern day trader with $100,000 in assets in her margin account.

What is a pattern day trader account?

If you make four or more day trades over the course of any five business days, and those trades account for more than 6% of your account activity over that time period, your margin account will be flagged as a pattern day trader account.

What is a pattern day trader (PDT)?

Understanding these legal requirements is crucial for avoiding penalties and maximizing your trading potential. The Pattern Day Trader (PDT) rule applies to margin accounts and requires a minimum equity of $25,000 for those who execute four or more day trades within five business days.