Day trade, or round-trip trading, is a type of transaction in which a person buys and sells the same stock on the same day.
Thus, the Pattern Day Trade (PDT) rule is a rule enforced by the US stock market regulatory body (FINRA). According to the PDT rule, you can't make four day trade trades over a rolling period of five business days, regardless of amount.
There are two ways to count day (round-trip) trades:
Suppose a customer buys 100 shares of company ABC, then sells 50 of these shares, and later in the day sells another 50. It means that the total number of shares purchased was 100, and the total number of shares sold was 100, which constitutes one round trip (calculated by the total number of shares, regardless of how many trades).
Suppose a customer buys 50 shares of company ABC, and then sells 50 of those shares. Later, that customer buys another 50, and then sells 50. It means that two separate day trades took place (calculated by counting buy & sell orders instead of number of shares), because:
One buy & sell of 50 shares = one round trip
Another buy & sell of 50 shares = another round trip
It is consensus around the market: day trades are very risky. That's because the stock market tends to be very volatile in the short term.
If you are aware of the risks but still want to start day trading in the US market, be careful: you can execute up to three day trades using the same asset in a period of five business days.
⚠️ To ensure that you are not considered a "pattern day trader", you must refrain from trading for 5 business days after your third day trade
⚠️ After your fourth transaction during this period, your account may be restricted and you will be considered a "pattern day trader". This restriction applies if you have less than $25,000 in account, and consists of going 90 days without being able to buy or sell shares on U.S. exchanges.
You have the following options if your account is locked out and marked as "Pattern Day Trader":
Deposit additional funds to increase your account balance to the required minimum of $25,000
Wait for the restriction to expire in 90 days, once the 90 calendar days are completed, the account will be automatically unblocked by DriveWealth.
*FINRA (US stock market regulator) allows brokerage firms to remove the PDT tag from a customer's account within 180 days.
Securities trading is offered through Northbound Securities LLC, an affiliate of Vest