What is Pattern Day Trader (PDT)?
A pattern day trader is any US margin account holder who executes four or more day trades within five business days, requiring a minimum account balance of $25,000 under FINRA rules.
Pattern Day Trader (PDT) Explained
The PDT rule is one of the most important regulatory constraints for US traders. If your account falls below $25,000, you'll be restricted from day trading until you deposit more funds. This rule applies to margin accounts, not cash accounts. Traders with less than $25,000 should consider swing trading, cash account strategies, or trading futures/forex which have different rules.
Real-World Example
You have a $15,000 margin account. On Monday, you make three day trades. On Tuesday, you make one more — triggering PDT status. Since your balance is under $25,000, your account is restricted to closing trades only until you deposit enough to reach $25,000.
Related Terms
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