Pattern Day Trader
Pattern Day Trader (PDT) is a label, not a strategy. It's a classification that a US brokerage applies to your account once your trading activity crosses a certain pattern, and once applied, it triggers extra rules about how much money you must keep in the account.
The pattern in question is simple to describe: you buy and sell (or short and cover) the same stock or option within the same day, and you do this repeatedly within a short rolling window. A "day trade" here means opening and closing a position in the same security on the same day. If you do enough of these within a set number of trading days, your broker flags the account as a pattern day trader account under rules that trace back to FINRA and the exchanges.
The nuance that trips people up is twofold. First, the classification is about the account, not really about intent — you don't have to think of yourself as a "day trader" to get flagged; a few active days can be enough. Second, once flagged, the account is typically required to maintain a minimum equity level, and if it falls below that level you can be restricted from day trading (sometimes facing a margin call or a freeze) until you bring the account back up. The exact trade-count threshold, the exact lookback window, and the exact minimum-equity dollar figure are set by regulation and can be revised, so they're worth checking directly rather than assuming.
It's also worth knowing this mainly applies to margin accounts, not cash accounts, and that brokers sometimes apply their own stricter versions of the rule on top of the regulatory minimum.
This term depends on a rule or threshold that changes over time, so no specific figure is quoted here. The current text asserts specific figures (4 round-trip trades in 5 business days, a 6% threshold, and implies a margin account requirement) tied to FINRA/exchange rules on Pattern Day Trader classification and minimum equity requirements. These thresholds and dollar minimums (e.g., the minimum equity requirement, often cited historically as $25,000) are set by FINRA and exchange rules and are subject to change. A human editor should verify the current round-trip trade count threshold, the lookback window length, the percentage threshold exception, and the minimum equity dollar amount directly against the current FINRA rulebook (or the relevant exchange rule) before publishing.
If your account gets flagged as a Pattern Day Trader without enough equity, your broker can restrict or freeze your ability to open new day trades, which can lock you out of managing intraday positions exactly when you need flexibility.
A trader with a $9,000 margin account buys and sells the same tech stock four separate times across three different days within a week. Their broker's system counts this as four day trades in the lookback window, flags the account as a Pattern Day Trader, and then restricts further day trading because the account equity is below the required minimum for PDT accounts — until the trader deposits more funds or the flag is reviewed.
Learn it by trading it.
Every term in this glossary shows up daily on our live desk.
Watch a morning, free