What is the Pattern Day Trader (PDT) Rule?

Stock Market Terms explained as simple as possible

QUICK ANSWER

The pattern day trader rule is a regulation for US citizens to not do more than four day trades in 5 days with an account that has less than $25,000.

This rule will not apply if you have more than $25,000 in your account.

Why does this rule exist?

It was initially designed to protect traders from overtrading. Many traders agree though that you are at a considerable disadvantage with this rule as you may get stuck in a trade not being able to get rid of your position (shares you own) anymore. If you are still in a position after your 4th day-trade, you have to wait until the 5-day period is over to close your position.

Who is this rule for?

It only applies to U.S. citizens for trading accounts that are in the U.S.

How can I get around this rule?

The only way to get around it is to find a broker that is outside the US. That’s why we recommend checking out one of these brokers where the PDT does not apply.

Do you want to be a successful stock trader?

Discover our FREE and SIMPLE stock trading guide!
Get Started