By Gordon Gottsegen
Finra voted to change its pattern day-trading rule, which would allow investors with smaller account sizes to trade actively
Retail investors may soon be able to day trade regardless of how much they have invested.
It could get easier for anyone to start day trading soon – but should they?
This week, the Financial Industry Regulatory Authority announced that it had voted to change its pattern day-trading rule. Previously, Finra required investors to have an account worth at least $25,000 in order to day trade, which involves opening and closing a stock or option position within the same day. Doing this four or more times over a five-business-day period would get you marked as a pattern day trader, potentially resulting in your account getting restricted – unless you had enough money.
Now, that restriction may go away, which would allow investors of all account sizes to day trade.
“I think this is one of the most significant changes that Finra has made to equity-market structure in decades,” Adam Cohn, head of trading operations at TradeStation, told MarketWatch.
Cohn said that the pattern day-trading rule was put into effect around the time of the dot-com bubble as a way to put up some guardrails in response to an explosion in amateur day trading. The rule was not only meant to protect retail investors from trading too actively, but also to protect brokerages that had to monitor margin requirements and risk. However, since the technology around executing retail trades has gotten much better over the past few decades, those brokerage risks have come down quite a bit.
“The day-trading rules essentially became somewhat obsolete as the technology evolved,” Cohn said. “Firms were no longer allowing clients to overspend the available funds in their account because of the ability to validate buying-power values and margin requirements at the time of trade.”
But while technology has minimized the risk day trading poses to brokerage firms, risks remain for the individual trader.
“While I believe that these regulations are out of date and in need of updating, our markets have become casinos, and these changes will only benefit the house – [payment-for-order-flow] brokers and high-speed middlemen,” Dave Lauer, co-founder of Urvin Finance and investor-advocacy group We the Investors, told MarketWatch.
Market-making firms and brokerages that collect payment for order flow benefit when retail investors trade more, because they make money off of each trade.
“These firms are incentivized to encourage more active trading and are lobbying hard for changes like this. Unfortunately, as usual, it’ll be the average investor that is harmed,” Lauer said.
What the actual traders think
A handful of retail traders echo this sentiment that inexperienced traders could end up losing money because of the rule change.
Emre Arapkirli, a retail investor from New Jersey, said the change was a big deal, but it also gives him pause.
“From my understanding, most day traders lose money in the market. Also, most new traders lose money in the market as well,” Arapkirli told MarketWatch.
He said that he sees the pattern day-trading rule as a way to protect people from buying or selling in panic and falling victim to their emotions. Yet at the same time, he believes people should be allowed to do what they want with their money as long as they aren’t hurting others.
“So I am not against this change, but I think a lot of people are going to end up losing money that they can’t afford to lose,” Arapkirli told MarketWatch.
The rule change could open up the floodgates to more everyday people actively trading, and that influx could end up impacting overall market volatility.
“It’s going to have a pretty big impact in the retail market structure, and I can see there just being a huge volatility spike in the market,” Anmol Jena, an individual investor from Texas, told MarketWatch.
Jena said this could lead to more intraday churn in popular stocks and more people trading short-dated options. He said he may shift his strategy toward selling more options in order to adjust to this change.
But even traders who have run into the pattern day-trading rule in the past have some reservations about the $25,000 barrier going away. Aaron Cook, an active retail trader from Florida, once got his account flagged for 90 days for pattern day trading. He said the experience almost made him stop trading forever.
“I know that PDT rule kept me from blowing my account in a week or two,” Cook told MarketWatch.
He recalled working to get his trading account above the $25,000 mark, but the added pressure meant he would trade more conservatively. He would get out of trades and take losses out of fear of dipping below that level and losing the ability to day trade. He said he learned to trade with the pattern day-trader rule in the back of his mind.
“Most people with under $25,000 are new traders and struggle with emotions. This will allow them to have fear take over and the ability to sell when otherwise they wouldn’t be able to,” Cook said. “It’s both positive and negative.”
Cook said that the removal of this guardrail could be “very, very dangerous” for inexperienced traders.
“Trading has risk – it always has,” Cohn said. “So I believe that there’s always going to be accounts that don’t understand proper risk management and [will] overtrade.”
Without the pattern day-trading rule, retail investors would have greater individual responsibility to manage their risk effectively. But Cohn also said that the onus is on the brokerages to supply their clients with proper education, as those brokerages don’t want their customers blowing up their accounts and walking away from the market altogether.
Now that Finra has voted to change the pattern day-trading rule, it will go to the Securities and Exchange Commission for approval.
-Gordon Gottsegen
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
09-26-25 1250ET
Copyright (c) 2025 Dow Jones & Company, Inc.
