FINRA and the NYSE have instituted regulations intended to limit the amount of trading that can be done in accounts with small amounts of capital, specifically accounts with less than 25,000 USD Net Liquidation Value.
What is a day trader?
What is the definition of a "Potential Pattern Day Trader" (PDT)?
A potential pattern day trader means that an account has less than $25,000 minimum Net Liquidation Value AND the number of available day trades (3) has already been used within the last five days.
What happens if an account with less than $25,000 is flagged as a day trading account? Or, if the account is flagged as a PDT account, and the value subsequently falls below $25,000?
The customer has the following options:
- Deposit funds to bring the account's equity up to the required minimum of $25,000
- Wait the required 90 day period before any new positions can be initiated
If the intraday situation occurs, the customer will immediately be prohibited from initiating any new positions.
However, customers should be able to close any existing positions in their account, but will not be allowed to initiate any new positions.
Should the Net Liquidation Value figure goes back above the threshold amount ($25,000), then the account will once again have unlimited day trades available.
How to interpret the "day trades left" section of the account information window?
For example, if the window reads (0,0,1,2,3), here is how to interpret this information:
DAY 1 => If today was Monday, the first number within the parenthesis (0) means that 0-day trades are available for today.
DAY 2 => The 2nd number in the parenthesis (0) means that no day trades are available on Tuesday.
DAY 3 => The 3rd number within the parenthesis (1) means that on Wednesday 1-day trade is available.
DAY 4 => The 4th number within the parenthesis (2) means that on Thursday if 1-day trade was not used on >Tuesday nor Wednesday, the account would have 2-day trades available.
DAY 5 => The 5th number within the parenthesis (3) means that if no day trades were used on either Wednesday or Thursday, then on Friday, the account would have 3-day trades available.