# Pattern Day Trader Rule > The US pattern day trader rule applies to margin accounts with four or more day trades in five business days. Learn the $25,000 minimum, workarounds and changes. Source: https://learn.tradelabsai.com/industry/pattern-day-trader-rule/ Track: The Trading Industry · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Pattern Day Trader Rule", https://learn.tradelabsai.com/industry/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 | Term | Meaning | |---|---| | Day trade | Buying and selling (or shorting and covering) the same security on the same day in a margin account | | Pattern day trader | Four or more day trades within five rolling business days, if those trades are more than 6% of total trades in that period | | Minimum equity | $25,000 in the margin account on any day the trader day trades, under the long standing rule | | Day trading buying power | Up to 4 times maintenance margin excess for stocks, based on the prior day's close | ## 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](https://learn.tradelabsai.com/markets/margin/). **Example: Counting day trades** A trader with $10,000 in a margin account buys and sells shares of company A on Monday (1 day trade), buys and sells company B on Tuesday (2), buys company C twice and sells it all on Wednesday (counted as 1 day trade by most brokers, though methods vary) (3), and buys and sells company D on Thursday (4). That is four day trades within five business days, and the account is flagged as a pattern day trader. With equity below $25,000, the trader is restricted from further day trading under the long standing rule. A fifth trade on Friday would also count toward the next rolling window. ## What the rule does not cover | Not covered | Notes | |---|---| | Cash accounts | No PDT rule, but trades must use settled funds. See [Account Types and Margin Rules](https://learn.tradelabsai.com/industry/account-types-and-margin-rules/) | | Futures | Regulated by the CFTC, not FINRA; no PDT rule. See [Futures Trading](https://learn.tradelabsai.com/markets/futures-trading/) | | Spot forex | No PDT rule; different regulation. See [Forex Trading](https://learn.tradelabsai.com/markets/forex-trading/) | | Crypto | No PDT rule. See [Crypto Trading](https://learn.tradelabsai.com/markets/crypto-trading/) | | Accounts outside the US | Different rules apply | ## 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](https://learn.tradelabsai.com/strategies/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](https://learn.tradelabsai.com/industry/trading-regulators/). ## 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](https://learn.tradelabsai.com/industry/account-types-and-margin-rules/). ## Continue learning - Next lesson: [Account Types and Margin Rules](https://learn.tradelabsai.com/industry/account-types-and-margin-rules/) - Previous lesson: [Front-Running](https://learn.tradelabsai.com/industry/front-running/) - Related: [Front-Running](https://learn.tradelabsai.com/industry/front-running/): Front running means trading ahead of a known pending order to profit from its impact. Learn the illegal and legal forms, crypto MEV and how to protect orders. - Related: [Account Types and Margin Rules](https://learn.tradelabsai.com/industry/account-types-and-margin-rules/): Cash, margin, portfolio margin and retirement accounts follow different rules. Learn Regulation T, maintenance margin, settlement and good faith violations. - Related: [Day Trading](https://learn.tradelabsai.com/strategies/day-trading/): Day trading means opening and closing positions within the same session. Learn how it works, the costs, rules, risks and what a realistic day looks like. - Related: [Becoming a Retail or Day Trader](https://learn.tradelabsai.com/industry/becoming-a-retail-or-day-trader/): What it really takes to trade your own money: the evidence on day trader results, capital needs, costs, a realistic learning path and warning signs to watch. - Related: [Margin](https://learn.tradelabsai.com/markets/margin/): Margin is the deposit you put up to borrow money or open leveraged positions. Learn initial and maintenance margin, margin calls, interest and how to avoid them. - Related: [How to Choose a Broker](https://learn.tradelabsai.com/industry/how-to-choose-a-broker/): A practical checklist for choosing a broker: regulation, safety of funds, real trading costs, markets, platforms, support and the red flags to watch for.