What is a pattern day trader?

The Pattern Day Trading Rule This rule essentially acts as a limit to the trading activities of a day trader. Your broker may flag you as a pattern day trader if you use a margin account to execute 4 or more day trades during a 5-day window and if the value of those trades is more than 6% of your account activity during the same period.

Is pattern day trading illegal?

While the rule does limit some traders’ activities, it serves as a protection mechanism against excessive losses for inexperienced or undercapitalized investors. So while Pattern Day Trading isn’t illegal per se, it does require a certain degree of knowledge and understanding of the various rules and regulations.

Do pattern day trading rules apply to my cash account?

So, before you start trading, check you’re within your account rules, in line with your countries financial regulations, and meeting and any tax obligations. Pattern Day Trading Rules Explained. Whether Over or Under 25k, Pattern trading rules may apply to your cash account.