In addition, pattern day traders cannot trade in excess of their "day-trading buying power," which is generally up to four times the maintenance margin excess as of the close of business of the prior day. ![]() This required minimum equity must be in your account prior to engaging in any day-trading activities. Pattern day traders must maintain minimum equity of $25,000 in their margin accounts. If the account falls below the $25,000 requirement, the pattern day trader will not be permitted to day trade until the account is restored to the $25,000 minimum equity level. This required minimum equity, which can be a combination of cash and eligible securities, must be in your account prior to engaging in any day-trading activities. What are the requirements for pattern day traders?įirst, pattern day traders must maintain minimum equity of $25,000 in their margin account on any day that the customer day trades. If you change your trading strategy to cease your day trading activities, you can contact your firm to discuss the appropriate coding of your account. In general, once your account has been coded as a pattern day trader account, a firm will continue to regard you as a pattern day trader even if you do not day trade for a five-day period because the firm will have a “reasonable belief” that you are a pattern day trader based on your prior trading activities. For example, if the firm provided day-trading training to you before opening your account, it could designate you as a pattern day trader. The rules also require your firm to designate you as a pattern day trader if it knows or has a reasonable basis to believe that you will engage in pattern day trading. Please contact your firm for more details on how they count trades to determine if you are a pattern day trader. There are two methods of counting day trades. Who is a pattern day trader?Īccording to FINRA rules, you are considered a pattern day trader if you execute four or more "day trades" within five business days-provided that the number of day trades represents more than six percent of your total trades in the margin account for that same five business day period. Day trading in a cash account is generally prohibited. ![]() The rule applies to day trading in any security, including options. What is a day trade?Ī day trade occurs when you buy and sell (or sell and buy) the same security in a margin account on the same day. Once you understand the requirements you have to meet, you reduce the risk that your firm will place restrictions on your ability to trade. Do you actively trade stocks? If so, it's important to know what it means to be a "pattern day trader" (PDT) because there are requirements associated with engaging in pattern day trading.
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