what is Pattern Day Trader

**Pattern Day Trading (PDT) is a regulatory designation for traders who execute four or more day trades within a five-business-day period using a margin account.** This practice is subject to certain restrictions to discourage excessive trading and protect both traders and brokerage firms from risk.

1. **Definition and Requirements**:
- A PDT is defined as a customer who executes four or more day trades within five business days, where the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period.
- Pattern day traders must maintain a minimum equity of $25,000 in their margin account on any day that they day trade.
2. **Trading Limitations**:
- Once a customer is flagged as a pattern day trader, their trading will be restricted to two times the maintenance margin excess until the margin call has been met.
- If the account falls below the $25,000 minimum equity level, the pattern day trader will not be permitted to day trade until the account is restored to the required level.
3. **Implications of the PDT Designation**:
- Being designated as a pattern day trader does not necessarily mean the end of trading activities, but it does place additional restrictions on the account and the trader's trading practices.
- Traders should be aware that engaging in excessive day trading can lead to this designation, which can limit their trading flexibility and increase the risk of default.
4. **Avoiding the PDT Rule**:
- Traders can avoid the PDT rule by ensuring their account equity remains above the $25,000 minimum, by not exceeding the day-trading buying power limitation, and by being mindful of the overall number of day trades within the five-business-day period.
- It is also advisable for traders to monitor their trading activities closely and to have a plan in place to manage their account equity and trading volume to avoid triggering the PDT rules.

In conclusion, traders should be aware of the risks associated with day trading and the potential consequences of being designated as a pattern day trader. By understanding the rules and managing their trading activities responsibly, traders can avoid the restrictions and maintain the flexibility to pursue their trading strategies effectively.