To better understand Pattern Day Trading and the restrictions incurred as a result, we’ll break down the phrase.
Day Trades are when you buy and sell the same stock on the same trading day.
For instance, triggering a buy order on TSLA at 10 AM, then selling the same TSLA stock before the close of trading that day.
Pattern Day Trading (in short) is when a consistent pattern of day trades is observed on your account.
Under US regulatory (FINRA) rules this is defined as more than three (4+) Day Trades in a rolling five day period.
Each time you do a Day Trade, you will receive a Day Trading flag.
If you receive more than three (4+) Day Trading flags in the rolling five day period you will be marked as a Pattern Day Trader and be unable to make another day trade for 90 days.
This restriction is the result of what is known as a Pattern Day Trading violation.
Continued pattern day trading can result in further restrictions from our US broker DriveWealth.
Please note, these restrictions do not apply to accounts with a balance over $25k.