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Introduction to Day Trading

May 14, 2020

Day trading refers to buying then selling or selling short then buying the same security on the same day. Just purchasing a security, without selling it later that same day, would not be considered a day trade.

Does the rule affect short sales?
As with current margin rules, all short sales must be done in a margin account. If you sell short and then buy to cover on the same day, it is considered a day trade.

Does the rule apply to day-trading options?
Yes. The day-trading margin rule applies to day trading in any security, including options.

What is a pattern day trader?
You will be considered a pattern day trader if you execute four day trades in a five business day period.

Would I still be considered a pattern day trader if I engage in four or more day trades in one week, then refrain from day trading the next week?
In general, once you have been coded as a pattern day trader, the firm will continue to regard you as a pattern day trader even if you do not day trade for a five-day period. This is because the firm will have a “reasonable belief” that you are a pattern day trader based on your prior trading activities. However, we understand that you may change your trading strategy. If you have not placed any day trades within a ninety calendar day period, you may contact us to discuss the appropriate coding of your account.


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See also

Day Trading Requirements

Day Trading Requirements

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Day Trading Requirements

Why Day Trading Margin Requirements are Important

Market BasicsStocks & ETFsThe primary purpose of the day-trading margin rules is to require that certain levels of equity be deposited and maintained in the margin accounts of Day Traders, and that these levels be sufficient to support the risks...

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Day Trading Requirements

Day-Trading Minimum Equity Requirements

Market BasicsStocks & ETFsThe minimum equity balance requirements on any day in which you trade is $25,000.01. The required $25,000.01 must be deposited in the account prior to any day-trading activities and must be maintained at all times. Why is...

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