When do PDT rules apply?

Asked 2 years ago

I learned pattern day trading rules apply only to Margin accounts. Do the PDT rules apply if I have an individual brokerage or an IRA account with $6,000 and trade with cash (not margin-IRA, it doesn't allow margin)? Or is this how I'll avoid PDT and be allowed to perform unlimited day trades?

Andia Rispah Igobwa

Tuesday, September 07, 2021


If you carry out at least four-day trades in five business days using a margin account, PDT rules apply.

In addition, to be designated as a pattern day trader, there should be at least $25,000 in your account.

Andrew Moran

Thursday, September 09, 2021

So, first, according to Financial Industry Regulatory Authority (FINRA), pattern day trader (PDT) rules go into effect if you trade four or more times the same security in five trading sessions (business days). Also, the PDT rule will go into effect if your day-trading activities account for more than 6% of your total trading affairs for the same five-day duration.

Now, each day trading account must be a margin account. Your individual retirement account (IRA) cannot be a margin account, so this means that day trading is prohibited in your IRA.

One more note: FINRA recently established a PDT rule that mandates all day traders have at least $25,000 in their brokerage accounts.

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