What is the Pattern Day Trader (PDT) Rule?
PATTERN DAY TRADER (PDT) RULE – In the United States, a pattern day trader is a Financial Industry Regulatory Authority (FINRA) designation for a stock trader who executes four or more day trades over the course of five business days using a margin account and whose number of day trades are more than six percent of the customer’s total trading activity for that same five-day period.
When this type of trading activity occurs, the broker will flag the account as a PDT. The account is then subject to special rules, the main one being that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account. The required minimum equity must be in the account prior to any day trading activities. Three months must pass without a day trade for a person so classified to lose these restrictions once they are imposed.
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