Pattern day trading basics
Pattern day trading (PDT) is the act of buying and selling the same financial market, such as forex or shares, on the same day, on the same margin trading account. To be considered a pattern day trader, you must be using an account that’s regulated by FINRA in the US, and execute more than four day trades on your margin account in a five-day period.
With us, when you trade using our US options and futures margin account, you are subject to PDT. However, this doesn’t apply on our other accounts.
When you trade with a margin account, you trade using leverage. This means you can open a position with a deposit and still get exposure to the full value of the trade. Trading on margin will magnify your profits, but it will also amplify any losses.
If you execute fewer than four day trades in five days, then you’re still a day trader – just not a pattern day trader. These trades must also comprise more than 6% of the total trades on your account.
Learn about different trading styles
Pattern day trading can be a time-intensive activity, which means you’ll have to check market prices and news regularly. You should rely on thorough technical analysis to help you identify signals to open and close trades. You can also use fundamental analysis to prepare for upcoming economic events that may cause volatility in the market.
