What Is the Pattern Day Trader Rule?
The PDT rule affects every US retail trader with under $25,000. Here's exactly what it is, how it works, and how to trade around it legally.
Basics · June 21, 2026 · 4 min read
The Pattern Day Trader (PDT) rule is a FINRA regulation that applies to US margin brokerage accounts. It states: if you execute 4 or more 'day trades' (buying and selling the same security within the same trading day) within a rolling 5-business-day period, and these trades represent more than 6% of your total trading activity in that period, you are classified as a 'pattern day trader.' Once classified, you must maintain a minimum account balance of $25,000 at all times. If you fall below $25,000, your trading is restricted.
What Counts as a Day Trade
A day trade is any position opened and closed within the same trading day in a margin account. Buying 100 shares of AAPL at 10:00 AM and selling them at 2:00 PM = one day trade. Buying 50 shares and then another 50, then selling all 100 in the same day = still one day trade (it's about the round trip, not the number of orders). Day trades in cash accounts don't count toward the PDT rule — but cash accounts have their own restriction: you can only trade with settled funds (settlement takes 2 business days for stocks).
How to Work Around the PDT Rule
Legal approaches for traders with under $25,000: (1) Use a cash account instead of a margin account — no PDT rule, but you can only use settled funds. (2) Trade futures — the PDT rule does not apply to futures markets. One NQ micro contract (MNQ) provides leveraged exposure to the Nasdaq with no day trade restrictions. (3) Trade forex — also not subject to PDT. (4) Use an offshore broker — some international brokers offer accounts to US residents without PDT restrictions, though regulatory protections are reduced. (5) Simply limit yourself to 3 day trades per 5 business days until you reach $25,000.
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