This strategy involves buying and selling assets within the same trading day to profit from short-term price movements. It carries significant risk and requires active market monitoring.
What is a Day Trade
A Day Trade is defined as the purchase and sale of the same position within the same market day.
- Regulation: Per FINRA rules, Plus (Margin) Accounts with a balance below $25,000 are limited to three (3) day trades within five (5) business days. Exceeding this limit results in a 90-day restriction where only closing positions is allowed.
Pattern Day Trader (PDT)
A Pattern Day Trader is a client with a Plus (Margin) Account who executes four (4) or more day trades within five consecutive business days.
- Restriction: Accounts with less than $25,000 that exceed the limit will be restricted from making new purchases for 90 consecutive days. This FINRA regulation promotes responsible use of leverage.
Day Trader (Account Types)
- Basic (Cash) Account: No restrictions on the number of day trades.
- Plus (Margin) Account: Limited to 3 day trades every 5 business days if the balance is under $25,000.
