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Stake Academy - Day Trading

You may have noticed the trade counter in your Stake App profile page. It quietly tallies all the trades you make during the week. Certain investors face regulatory restrictions on the number of trades they can make over a week. These are known as Pattern Day Trading rules. Let’s dig into the details.

PDT

A day trade involves buying and selling the same stock or ETF during the same trading session. Fear not, we have heaps of examples below. There are a few intricacies.

Traders who execute three day trades within a rolling five day period have hit their PDT limit. Should traders make a 4th day trade, they risk a 90-day ban.

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 third day trade in a rolling five trading day period.  Find it in under ‘Day Trade Settings; in your profile page. 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.

To be clear, the Financial Industry Regulatory Authority (FINRA) institutes such rules rather than Stake.

Stake Black

Stake Black makes trading on unsettled funds a possibility for those with more than US$25k in their accounts. For those who maintain a balance above US$25k, unlimited day trades are possible on the platform without PDT restrictions.

Day Trading Examples

There are a heap of “what ifs”, so here are a few examples of what counts as a single or multiple trades:

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

Example 2:

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

These are 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

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