A Pattern Day Trader (PDT) is someone who buys and sells the same asset on the same day.
The rule states that investors cannot execute more than 4 trades classified as PDT within a 5-business-day period.
How are "day trades" counted?
Pedro buys 100 shares of ABC, then sells 50 shares, and later that same day sells the remaining 50 shares.
At the end of the day, the total number of shares bought was 100, and the total number of shares sold was 100. This constitutes one round trip (calculated based on the total number of shares, regardless of how many individual trades occurred).
Maria buys 50 shares of ABC, then sells 50. Later, she buys another 50 shares and sells 50 again. This means there were two "day trades" (calculated based on the combination of buy/sell trades, not the number of shares), because:
One buy and sell of 50 shares = one round trip
Another buy and sell of 50 shares = an additional round trip
If you wish to trade in the day trading model, you can only execute up to three trades using the same asset within a 5-business-day period.
⚠️ To ensure you are not classified as a "Pattern Day Trader," you must refrain from trading for 5 business days after completing your third day trade.
⚠️ If you execute a fourth trade within this period, your account may be restricted, and you will be classified as a "Pattern Day Trader." This restriction applies if your account balance is less than $25,000 and means you will not be able to buy or sell stocks in U.S. markets for 90 days.
To unlock your account, you must:
Deposit additional funds to increase your account balance to the required minimum of $25,000.
Wait for the 90-day restriction to expire. Once the 90 calendar days are complete, DriveWealth will automatically unlock your account.
Securities trading is offered through Northbound Securities LLC, an affiliate of Vest