Pattern Day Trading Rule - SEC & FINRA NASD Rule 2520
day trader rule history:
27, 2001, the SEC approved rule changes proposed by the
NYSE and FINRA (NASD) aimed at imposing more stringent margin
requirements for day trading customers. Under these
rules, customers who are deemed "pattern day traders"
must have at least $25,000 in their accounts and can
only trade in margin accounts.
This site is intended to
clarify this rule and offer suggestions about trading in
relation to this rule.
pattern day trader rule summary:
An NASD &
SEC rule that applies to anyone who buys and sells a
particular security in the same trading day (day
trades), and does this four or more times in any five
consecutive business day period. A pattern day trader is
subject to special rules. The main rule is that in order
to engage in pattern day trading you must maintain an
equity balance of at least $25,000 in a margin account.
complete version is listed here:
FINRA Rule 2520
What is a day trade?:
It is important to understand what is
considered a day trade under this rule. A day trade is
when you buy and sell the same stock (same symbol)
during the same day. This includes if you buy and sell
during the pre-market, regular market hours, or in the
after-market hours on the same day. A day trade is just a buy and sell
(or short sell and buy to cover) of the same stock in one trading day.
What is not a day trade?:
If you open a stock position one day and hold it
overnight and cover it the next day (or any subsequent
day), that is an overnight trade. A trade held
overnight is not considered a day trade in relation to
this rule. There is no limits imposed on overnight trading,
you can do this as often as you want.
Scope of the
pattern day trader rule:
The pattern day trader rule applies to
all brokers in the United States who are NASD members.
There may be foreign brokers who are not directly regulated by NASD
and offer pattern day trading to clients with less than $25,000
in their account.
This rule only applies to stock and
option trading. There is no pattern day trading rule regulations
currently on futures or forex.
"site") is an informational website only. Pattern Day
Trader Rule may include sections of FINRA (NASD),
SEC or other regulatory rules. These rules may be subject to
change at anytime and those changes may not be reflected on this
site. The site may also
have summaries or incomplete versions of these rules, which have
not been approved by any regulatory agency. This site is not affiliated with any regulatory body, including but
not limited to FINRA (NASD) and SEC.
The fact that
this site may
have links to other websites does not constitute an
endorsement or recommendation of any kind. Hyperlinks to third
party sites are being provided for informational use only and
will be used at your own risk.
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