What is pattern day trading?

Stock trading in the United States is regulated by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).   In an effort to protect retail investors from the risks of day trading, FINRA rules limit the number of day trades certain investors can make within a specific period of time. Known as pattern day trading (PDT), the rule stipulates that an investor may not day trade (buy and sell the same security in the same day) more than 3 times in any rolling 5 market days. This rule only applies to securities transactions.

At TBanque, we adhere to SEC and FINRA trading limitations by putting rules in place designed to prevent activity that would result in pattern day trading. In the app, when you make the third day trade, we’ll let you know you’re hitting your limit for that 5-day period. If you try to make a fourth day trade before that period resets, you won’t be able to complete most trades until the next day.

In the rare case you do complete a fourth day trade within 5 business days, your account will be restricted from any day trading for a minimum of the next 30 calendar days. You’ll still be able to buy or sell stocks and ETFs, but you won’t be able to buy and sell the same security on the same day. Your ability to day trade crypto won’t be impacted.

Note, we count trades by direction. In other words, when you change from buying a specific security to selling it in a single day, you’ve committed a pattern day trade. For example, if you buy 10,000 shares and sell 2,000, that's considered a single day trade, since you have only bought and sold once. If you buy 10,000 shares and sell 1,000 shares and later that day, sell 2,000 more, you’ve still only committed a single pattern day trade. However, if you buy 10,000 shares, sell 4,000 shares, buy 1,000 shares, and sell 2,000 shares in a day, you'll have committed two pattern day trades since you’ve both bought and sold the same security twice.