Pattern Day Trader Rule

The pattern day trader (PDT) rule is a US regulation from FINRA that has shaped how small accounts can day trade stocks and options for over two decades. Under the long standing rule, a trader who makes four or more day trades within five business days in a margin account is classified as a pattern day trader and must keep at least $25,000 in equity in that account. Accounts below that level face trading restrictions. The rule was introduced in 2001 after the dot com era, aiming to limit risk for small accounts trading on margin. In 2025, FINRA moved to replace the fixed $25,000 requirement with a risk based intraday margin approach, subject to SEC approval, so check your broker's current rules.

Key definitions#

What happens below $25,000#

Under the long standing rule, if a pattern day trader's equity falls below $25,000, they cannot day trade until it is restored. Exceeding day trading buying power triggers a day trading margin call, which must be met within a few days, with trading restricted until then. Brokers may also flag an account as PDT based on its history and apply their own stricter policies. See Margin.

What the rule does not cover#

Common ways traders work within the rule#

1. Use a cash account and trade only with settled funds; since May 2024, US stock trades settle in one business day (T+1).
2. Limit day trades to three in any five business day window.
3. Swing trade instead, holding positions overnight. See Swing Trading.
4. Trade futures or other markets not covered by the rule, understanding their own risks and leverage.
5. Build the account above $25,000 before day trading stocks frequently.

Criticism and changes#

Critics argued the fixed $25,000 threshold was outdated, excluded smaller traders and pushed them toward riskier products. Supporters argued it protected inexperienced traders from leveraged losses. In 2025, FINRA approved proposed amendments to remove the fixed $25,000 minimum and the pattern day trader designation in favour of applying intraday margin requirements, which need SEC approval and broker implementation. Because timing and details can change, confirm the current rules with your broker. See Trading Regulators: SEC, CFTC, FINRA and NFA.

Frequently asked questions#

What is the pattern day trader rule?#

A FINRA rule that classifies margin account holders making four or more day trades in five business days as pattern day traders, who must keep at least $25,000 in equity under the long standing version.

Does the PDT rule apply to cash accounts?#

No, but cash accounts must trade with settled funds, which limits how often the same money can be reused.

Does the PDT rule apply to futures or crypto?#

No. It applies to securities in US margin accounts, not to futures, spot forex or crypto.

Next, learn the difference between cash and margin accounts in Account Types and Margin Rules.