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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    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 >>
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