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What is Day Trading and a Pattern Day Trading Violation?
What is Day Trading and a Pattern Day Trading Violation?
C
Written by Chanel
Updated over a week ago

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.

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