What is pattern day trading?

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

Defining a day trade 

You make a day trade when you buy and sell the same security on the same trading day. To help you stay on track, we’ve built a Day Trade Counter into the Stake platform.

Important to Note 

PDT rules come from U.S. regulatory body FINRA, not from Stake. Investors marked as Pattern Day Traders could face further restrictions beyond the 90-day trade restriction. Additional restrictions are at the discretion of our U.S. broker-dealer, DriveWealth. 

Exemptions from PDT 

Restrictions on Pattern Day Trading only apply to accounts valued under US$25,000 (in cash, securities or a combination of both). For this exemption to be applied on any given trading day, your account value must be over US$25,000 at the previous day’s market close. 

What if I’m marked as a Pattern Day Trader? 

If you’re ever marked as a Pattern Day Trader and would like to remove the trading restriction, you can fund your account above US$25,000 for the above exemption to apply. However, you must be able to maintain this minimum account value for the duration of the initially flagged 90-day period in order for the exemption to apply to you each day. 

Stake Day Trade Counter 

To keep our customers on the right side of the rules, we’ve built a Day Trade Counter that you can access on the Stake app by heading to: More > Settings > Trade settings > Day trade settings > Day trade protection. 

This will keep track of your trading activity and notify you when you’re on your third day trade in a rolling period of five trading days. You’ll always have the right to place a 4th day trade, but will be warned of the impact this may have.  

Day trading examples 

We know day trading can get confusing, so here are some practical examples.  

One Day Trade

Example 1: Buy, Sell 

You start a trading day with 0 shares of AAPL and place the following trades.

Buy 1 AAPL     

Sell 1 AAPL 

This constitutes a 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 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 AAPL.     

Buy 5 AAPL     

Buy 3 AAPL     

Buy 2 AAPL     

Sell 1 AAPL     

Sell 4  AAPL     

Sell 2 AAPL 

This is a 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 AAPL     

Buy 100 AAPL     

Sell 20 AAPL     

Sell 40 AAPL     

Buy 10 AAPL     

Sell 10 AAPL 

This constitutes 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 AAPL or 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, one per stock. 

Day trade 1 = Buy 100 AAPL, Sell 40 AAPL 

Day trade 2 = Buy 20 NFLX, Sell 10 NFLX 

Example 3: Across multiple trading days 

You currently hold 0 shares AAPL or 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 (one on Monday and one on Wednesday) as a change in direction within the same day occurred twice within a five trading day period.

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

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