Pattern Day Trader

DEFINITION of 'Pattern Day Trader'

An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

BREAKING DOWN 'Pattern Day Trader'

An individual deemed a pattern day trader must hold a minimum of US$25,000 in equity in his or her account before being allowed to day trade. This $25,000 equity amount must be maintained in the account at all times because it addresses the additional risks inherent in leveraged day-trading activities and ensures that customers, before continuing to day trade, cover any losses incurred in their accounts from the previous day.

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RELATED FAQS
  1. What qualifies a person as a day trader?

    As of Sept 28, 2001, the NASD (now, FINRA) and NYSE amended their definitions of day traders. A new term that they use is ... Read Answer >>
  2. What is the best time of the day to trade?

    Unlike traditional investing, trading, or day trading, has a very short-term focus. Analysis may be broken down to days, ... Read Answer >>
  3. Does the SEC day trading rule apply to cash accounts?

    I want to open a cash account of $2,000 dollars to day trade! I understand that without a margin ... Read Answer >>
  4. How is buying on margin regulated by the Securities and Exchange Commission (SEC)?

    Learn how FINRA and the Federal Reserve regulate margin account trading, and understand how pattern day trading can impact ... Read Answer >>
  5. What is the difference between investing and trading?

    Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing ... Read Answer >>
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    There are two likely reasons why a customer would be unable to buy and sell a stock in the same trading day. For simplicity's ... Read Answer >>
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