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.
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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.
Effectively, for stock investments, this means pattern day traders can trade up to four times their maintenance margin in excess of $25,000 as of the close of business of the previous day.
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.
A pattern day trader is generally defined as a customer who day trades four or more times in five business days.