Home › Guides › The pattern day trader rule
The pattern day trader rule
What is the pattern day trader rule?
Short answer: If you make four or more day trades within five business days in a US margin account, and those trades are more than 6% of your total activity, you are designated a pattern day trader and must maintain at least $25,000 in account equity. Fall below it and your trading is restricted until you top up.
What counts as a day trade
Buying and selling the same security on the same trading day. Buying today and selling tomorrow is not a day trade, no matter how short the holding period feels.
How to avoid it
Trade in a cash account rather than a margin account, accepting settlement delays. Keep to three day trades per rolling five days. Or trade with a broker outside US jurisdiction, where the rule does not apply — which is one genuine reason non-US traders use CFD accounts.
The uncomfortable context
The rule exists because regulators observed that undercapitalised frequent traders lose money at high rates. The published data on retail day trading outcomes has not improved since.
Where to do it
Frequently asked questions
Does the rule apply outside the US?
No. It is a FINRA rule applying to US margin accounts. Brokers regulated elsewhere set their own margin rules.
Does it apply to cash accounts?
No, but cash accounts require trades to settle before the funds can be reused, which limits turnover in a different way.
Reviewed August 2026. Information only — not investment, tax or legal advice.