What is the Pattern Day Trade Rule?

Pattern Day Trade (PDT) Rule is an SEC regulation that all United States Brokers must comply with their clients that prevents people with low Account balances from “over trading”.

If you have less than $25,000 in your Broker account, you can only do 3 day trades in a 5 day trade period. You will be flagged as a PDT and you must maintain the minimum account balance. If you do not have the funds in your account your account may be frozen for 90 days.

What is a Day Trade?

Buying then selling a stock in the same day. Same if you Sell Short, and Cover the same day.

 

Ways to get around the PDT

Have a Broker that is not based on the US. I don’t recommend this but if you had a broker, they may not be required to hold you to the PDT rule.

Have a Cash Account. With a Cash account you can trade as often as needed but when you buy and sell a stock, the funds from selling isn’t available for atleast 3 days.

Also you can only short Stock if you have a Margin Account.