PDT Rule (Pattern Day Trader)

A "day trade" is defined as buying and selling (or short selling and covering) the same security on the same trading day in a margin account. FINRA uses a rolling 5-business-day window to count day trades — not a calendar week.

Example: On Monday you buy and sell AAPL (1 day trade). On Tuesday you buy and sell TSLA (2 day trades). On Wednesday you buy and sell NVDA twice (4 day trades total in 3 days). You are now flagged as a Pattern Day Trader because you have 4+ day trades in 5 business days.

Once flagged, the PDT designation is permanent at that broker until you request removal (some brokers allow a one-time reset). You must maintain $25,000 in equity (cash + securities) at all times. If your account drops below $25,000 due to losses, you receive a "day trade margin call" and are restricted from day trading until you deposit funds to restore the minimum.

Important: the $25,000 minimum is measured at the start of the trading day. You cannot deposit $25,000 intraday and immediately day trade — the deposit must settle first (typically T+1 for cash, immediate for wire transfers at some brokers).

Cash Account Strategy: Cash accounts are exempt from the PDT rule entirely. The tradeoff is settlement time — stock sales take T+1 to settle (one business day). This means the cash from Monday's sale is not available for new trades until Tuesday. With enough starting capital, you can rotate through available settled cash and day trade every day without PDT restrictions. Many small-account traders use this approach.

Multiple Broker Accounts: Open accounts at two or three different brokers. Each broker tracks PDT independently. You get 3 day trades per 5-day period at each broker, giving you 6-9 total day trades per week. This is fully legal and commonly used.

Swing Trading: Instead of buying and selling the same day, buy today and sell tomorrow (or later). This is not a day trade and does not count toward the PDT limit. Many strategies work on a multi-day timeframe.

Options: Some traders use options to create synthetic day trade positions without triggering PDT. For example, buying a call and selling a call at a different strike on the same day creates a spread — but be aware that some brokers still count certain options strategies as day trades.

Offshore Brokers: Some non-US brokers do not enforce the PDT rule. However, US residents are still subject to FINRA regulations, and using offshore brokers to circumvent PDT can create tax and regulatory complications.

Crypto: Cryptocurrency trading is not subject to PDT rules because crypto is not regulated by FINRA. You can day trade crypto as frequently as you want regardless of account size.

Margin Accounts: The PDT rule applies to all margin accounts at US brokers, including Reg-T margin and portfolio margin accounts. This includes standard brokerage accounts, IRAs with margin features, and joint accounts.

Cash Accounts: Exempt from PDT. However, you cannot use unsettled funds — this is called a "good faith violation" (GFV) or "free riding." Most brokers restrict your account after 3-4 GFVs in a 12-month period.

IRA Accounts: Most IRAs are cash accounts and exempt from PDT. Some brokers offer limited margin in IRAs (for options), which can trigger PDT classification. Check with your broker.

Accounts Over $25,000: No PDT restrictions. You can day trade as frequently as you want. However, if your account drops below $25,000 during the day due to intraday losses, you may be restricted starting the next trading day.

Paper Trading Accounts: Not subject to PDT. Practice day trading strategies freely in a paper account before risking real capital.

When your broker flags you as a Pattern Day Trader, several things happen:

1. You receive a notification (email or platform alert) that you have been classified as a PDT.

2. If your account is above $25,000, nothing changes. You can continue day trading freely.

3. If your account is below $25,000, you are restricted to 3 day trades per 5-business-day rolling period until you deposit enough funds to reach $25,000.

4. If you exceed 3 day trades while restricted, your account is frozen for 90 days (you can only close existing positions, not open new ones) or until you deposit enough to reach $25,000.

5. Some brokers offer a one-time "PDT reset" that removes the flag and restores your 3 day trades. After using this reset, the next violation results in a 90-day freeze with no second chance.

The PDT flag follows you at that specific broker. If you open a new account at a different broker, you start fresh with no PDT flag and 3 available day trades.