What is a day trade?
When you buy and then sell the same stock on the same trading day, you’ve made a day trade.
What does the rule say?
The Pattern Day Trading rule under FINRA Rule 4210 stipulates that you are limited to no more than 3 day trades in a five trading day period unless you have at least US$25,000 in your Passfolio account on the previous trading day. The five-trading-day window doesn’t necessarily align with the calendar week, since weekends and holidays are not trading days.
If you make a fourth day trade in a five trading day period your account will be marked as Pattern Day Trader and you won't be able to place any new trades for 90 days or until you bring your account value to at least US$25,000.
Keep in mind that the account value does not take into account your cryptocurrencies, which are offered by Passfolio Financial. Therefore, only the account value in your stock account, which is provided to you by Passfolio Securities, is considered in your total account value for the Pattern Day Trading rule.
How can I keep track of my day trades?
In your app, we keep track of your day trades so you can better manage them. You can see the tracker by following these steps:
1. Head over to the Account page;
2. Tap Account Summary
3. Scroll down to Day Trades
Examples of Day Trades
1. One Buy, One Sell: you buy 1 share of ABC and then sell 1 share of ABC
a. This is considered 1 day trade.
2. Leading Sell: you sell 10 shares of ABC you bought the day before, then buy 1 ABC and sell 1 ABC again.
a. This is considered 1 day trade only, since you already owned the shares you first sold the day before.
3. Non-Leading Sell: you already own 10 shares of ABC you bought the day before, you buy 1 more and then sell it later the same day.
a. This is considered 1 day trade, because even though you already had shares of ABC, you opened a new position with the purchase of 1 ABC.
4. Multiple Buys & Sells: you buy 1 ABC and then buy 2 more ABC. Later the same day you sell 1 ABC and then sell 2 more ABC.
a. This is considered only 1 day trade since there was only 1 change in direction.
5. 2 Day Trades: you buy 10 ABC and sell 5 ABC. Later the same day you buy 10 more ABC and sell 10 ABC.
a. This is considered 2 day trades, since there were 2 changes in direction.
Orders not executed count as day trades?
No. An order only counts as a day trade once executed. However, you will notice that an open order will show as a day trade in the Day Trade tracker. We designed it like this to help you better manage your day trades and let you know how many you will have if your order is executed.
If you place a large order or an order for a low-volume stock, you may receive partial executions. Partial executions count towards your Day Trades, so if you enter a sell order while the original buy order has not been fully executed, you are at risk of executing multiple trades that would pair with each sell order, resulting in multiple day trades.