PDT Rule (Pattern Day Trader)

The PDT Rule is a regulation that requires brokerage accounts with less than $25,000 to limit day trading—buying and selling the same stock within a single trading day. If you make four or more day trades in a five-day period, your broker will flag you as a pattern day trader and restrict your account. You'll encounter this rule if you're actively trading stocks with a smaller account. It exists to protect inexperienced traders from the risks of frequent trading. For example, if Sarah makes three day trades on Monday and one on Tuesday, she'd hit the four-trade threshold and face trading restrictions until she deposits more cash or waits five days.