What is pattern day trading?

Under these rules, investors will be marked as Pattern Day Traders if they execute more than three day trades in a rolling five trading day period. If marked as a Pattern Day Trader, you may be restricted from making another day trade for 90 days.

To ensure our customers stay safe and on the right side of this regulation, we’ve built a day trade counter into the platform. However, please continue reading this FAQ to familiarise yourself with the details around PDT, which we’ve outlined below.

Important to Note

PDT is a US regulatory (FINRA) rule, not a Stake rule. Therefore, those marked as Pattern Day Traders could face further restrictions beyond the 90 day, day trade restriction, at the discretion of our US broker-dealer, DriveWealth.

Defining a Day Trade

You make a day trade when you buy then sell the same stock/security on the same trading day.

Defining Pattern Day Trading

As mentioned above, traders will be marked as Pattern Day Traders if they execute more than three day trades in a rolling five trading day period. If marked as a Pattern Day Trader, you may be restricted from making another day trade for 90 days.

Exemptions from PDT

Restriction on day trading only applies on account values under $25K, regardless of whether you’re on Stake Black or not. Please note, your account value must be over the $25k for 2-3 full trading days before this exemption is applied.

What if I'm marked as a pattern day trader?

If you are ever marked as a Pattern Day Trader or getting close, you can fund your account above $25K to remove the restrictions. However, you must be able to maintain this account value for the duration of the initial flagged 90 day period.

Stake Day Trade Counter

To keep our customers safe and on the right side of the rules, we’ve built a Day Trade Counter into Stake. This will keep track of all your day trades and notify you when you are on your 3rd day trade in a rolling five trading day period.  You’ll always have the right (and given the choice) to make a 4th day trade, but will be warned of the impact this may have. 

Day Trading Examples

We get that day trading can be confusing, so here are a few examples. 

One Day Trade

Example 1: Buy, Sell

You start with 0 shares of AAPL

    Buy 1 AAPL

    Sell 1 AAPL

This constitutes one day trade, because you bought then sold AAPL on the same trading day.

Day trade = Buy 1 AAPL, Sell 1 AAPL

Example 2. Sell, Buy, Sell

You already own 100 shares of stock AAPL.

    Sell 20 shares AAPL

    Buy 10 shares AAPL

    Sell 10 shares AAPL

This constitutes one day trade, since you already owned positions the first sell doesn’t count towards a day trade.

Day trade = Buy 10 AAPL, Sell 10 AAPL

Example 3. Buy, Buy, Buy, Sell, Sell, Sell

You currently hold 0 shares of stock AAPL

    Buy 5 AAPL

    Buy 3 AAPL

    Buy 2 AAPL

    Sell 1 AAPL

    Sell 4  AAPL

    Sell 2 AAPL

This is one day trade because there is only one change in direction between buys and sells

Day trade = Buy 5 AAPL, Buy 3 AAPL, Buy 2 AAPL, Sell 1 AAPL

More Than One Day Trade

Example 1. One stock

You currently hold 0 shares of stock AAPL

    Buy 100 AAPL

    Sell 20 AAPL

    Sell 40 AAPL

    Buy 10 AAPL

    Sell 10 AAPL

This is two day trades as there were two changes in direction.

Day trade 1 = Buy 100 AAPL, Sell 20 AAPL

Day trade 2 = Buy 10 AAPL, Sell 10 AAPL

Example 2. Two stocks

You currently hold 0 shares of stock AAPL and NFLX 

    Buy 100 AAPL

    Buy 20 NFLX

    Sell 40 AAPL

    Sell 10 AAPL

    Sell 10 NFLX

This constitutes two day trades there were two changes in direction.

Day trade 1 = Buy 100 AAPL, Sell 40 AAPL

Day trade 2 = Buy 20 NFLX, Sell 10 NFLX

Example 3. Across multiple days

You currently hold 0 shares of stock AAPL and NFLX 

    Buy 100 AAPL (Monday)

    Sell 40 AAPL (Monday)

    Sell 10 AAPL (Tuesday)

    Buy 20 NFLX (Wednesday)

    Sell 10 NFLX (Wednesday)

This constitutes two day trades as a change in direction within the same day, occurred twice within a 5 trading day period.  5 trade day period = Monday - Friday.

Day trade 1 (Monday) = Buy 100 AAPL, Sell 40 AAPL

Day trade 2 (Wednesday) = Buy 20 NFLX, Sell 10 NFLX