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What is 'Pattern Day Trading'?
What is 'Pattern Day Trading'?
Mohamad Daou avatar
Written by Mohamad Daou
Updated over a week ago

When you buy and then sell the same stock or ETF instrument within a single trading day, you’ve made a day trade.

Understanding the rule
You’ll be considered a pattern day trader if you execute 4 or more day trades within 5 trading days.

You’re generally limited to no more than 3 day trades in a 5 trading day period, unless you have at least $25,000 of portfolio value in your account at the end of the previous day. This sounds tricky, but it just means that within any 5 trading day period, once you place your fourth day trade you will be flagged as a pattern day trader and you’ll need to have a portfolio value greater than $25,000 at the end of the trading day to be able to continue day trading the next day.

If you intend to day trade and do so often, it's recommended that you maintain a total balance in your account of at least $25,000. Raseed is implementing a protection to prevent your account from getting restricted by limiting day trades to maximum of 3 trades over a rolling 5 business day period.

To help understand this a bit better, if you buy AAPL and sell it on the same day, it is a day trade. If you buy and sell AAPL and buy and sell TSLA on the same day, that is 2 day trades. If you buy AAPL on Monday and sell it on Tuesday, that is not a day trade, because you did not trade it on the same day. Also, if you bought and sold AAPL on Monday and bought and sold TSLA on Tuesday, that is a total of 2 day trades in 2 days. The day trade count will start re-setting after 5 days (assuming you do no more day trades in any subsequent days).

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