Pattern Day Trader


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Pattern Day Trader

A designation by the SEC of an investor who conducts more than four day trades in any five, consecutive trading days and for whom these trades make up at least 6% of his/her total trading activity. Because of the risk inherent to day trading, the SEC requires all pattern day traders to maintain at least $25,000 in equity in a margin account.
References in periodicals archive ?
A brokerage firm also may designate an investor as a pattern day trader if it knows or has a reasonable basis to believe that the investor is a pattern day trader.
Answer--A pattern day trader must maintain minimum equity of $25,000 on any day that the customer day trades.
The rules permit a pattern day trader to trade up to four times the maintenance margin excess in the account as of the close of business of the previous day.
Answer--Investors are considered pattern day traders if they trade 4 or more times in 5 business days and their day-trading activities are greater than 6% of their total trading activity for that same five-day period.
A pattern day trader is generally defined as a customer who day trades four or more times in five business days.
They also lack some of the disadvantages active traders are now facing, including decimalization issues, liquidity issues, and Pattern Day Trader account requirements, such as the $25,000 minimum account requirement.