Pattern day trading (PDT)

What is day trading?

A day trade is the act of buying and selling a particular financial instrument once or multiple times during a single trading day.  

What is Pattern Day Trading?

A day trade is defined as the buying and selling of a single security on the same day.

An investor can be marked as a Pattern Day Trader (PDT) if there is a reasonable basis to believe that you’ll engage in pattern day trading. The most common scenario that will trigger PDT is executing four or more ‘day trades’ over five consecutive trading days. A further common scenario is exceeding your day trade buying power 2 times and not clearing your day trade calls.

If you’re marked as a Pattern Day Trader, you may be restricted from making additional ‘day trades’ for 90 days or more.

In addition, if the customer exceeds their day trade buying power 2 times and doesn't clear their day trade calls, they will be flagged as PDT - please see more about day trade calls and day trade buying power here.

Important to Note

PDT rules are set by the U.S. regulatory body FINRA and enforced by our U.S. broker-dealer, DriveWealth, not by Stake. If flagged as a PDT, your ability to place ‘day trades’ will be restricted for a set period, typically 90 days.

Investors identified as Pattern Day Traders may face restrictions lasting beyond the standard 90-day period These additional measures are at the discretion of FINRA and/or DriveWealth.

Exemptions from Pattern Day Trading rules

Day trade restrictions only apply to those flagged as pattern day traders with PDT account balances under US$25,000 at the previous day’s market close. 

Your PDT account balance consists of: 

Total settled cash; 

Unsettled stock sale proceeds; and

The value of held securities 

To qualify for an exemption from PDT restrictions,, your total account balance must be above US$25,000 at the close of the previous trading day.

Keep in mind that while your PDT account balance is calculated based on total equity, only settled funds or available buying power can be used to place new buy orders.  

What is Day Trade Buying Power?

 Your ability to day trade is also subject to a specific limit called Day Trade Buying Power (DTBP). If you exceed your DTBP, you’ll receive a Day Trade Call. Failing to meet this call – and continuing to exceed your DTBP – can result in your account being flagged as a Pattern Day Trader. This will restrict your ability to place day trades for a set amount of time or until the call is resolved.  More information about day trade buying power and day trade calls can be found here.

What if I’m marked as a Pattern Day Trader? 

If you’re marked as a Pattern Day Trader and wish to have the restriction lifted, you’ll need to bring your total account balance above US$25,000. 

Please note, only settled deposits to your Wall St account (including FastFunds) count towards your PDT account balance. You must maintain this minimum PDT account balance before each trading day you plan to place buy orders. 

If you believe you’ve been flagged unfairly, you can contact our support team here. 

If I am flagged as PDT, can we remove the PDT flag as soon as I deposit the funds into my account?

Once you’re flagged, the PDT demarcation typically remains on your account in accordance with FINRA’s regulations. 

Because the status is based on your trading behaviour it's generally not removed immediately unless under exceptional circumstances. Investors can be marked as a PDT if there is a reasonable basis to believe that you’ll engage in pattern day trading.

If your or equity reaches or exceeds US$25,000, you can continue to day trade while the PDT flag remains on your account, as long as you stay within your margin limits.

If your equity stays below US$25,000, your Day Trade Buying Power will remain at US$0, and you'll continue to face trading restrictions. Even after the 90-day restriction period, the same rules apply. 

You can find more details about Day Trade Buying Power here.

Stake Day Trade Counter 

Stake has a Day Trade Counter to help you stay on top of your activity by tracking how many day trades you've made in a rolling 5-day window. . 

How to access:

• Stake app: Head to your Dashboard then > Manage > Account > Settings > Trading > Wall St day trade warnings > switch on Day Trade Protection
• On web: Click Profile (top right-hand corner) > Settings > Trading > Wall St Day trade settings > Day trade protection

We’ll alert you as you approach your fourth day trade within a 5-day window.  While you’ll always have the option to proceed, we’ll highlight the risks involved with placing that fourth trade. If you have any questions about PDT rules or restrictions, you can get in touch with the Stake support team here.  

Day trading examples 

We know day trading can get confusing, so here are some practical examples.  

One Day Trade

Example 1: Buy, Sell 

You start a trading day with 0 shares of AAPL and place the following trades.

   Buy 1 AAPL     

   Sell 1 AAPL 

This constitutes a day trade, because you bought then sold AAPL on the same trading day.

   Day trade = Buy 1 AAPL, Sell 1 AAPL 

Example 2: Sell, Buy, Sell 

You already own 100 shares of AAPL.     

   Sell 20 shares AAPL     

   Buy 10 shares AAPL     

   Sell 10 shares AAPL 

This constitutes one day trade. Since you already owned positions, the first sell doesn’t count towards a day trade.

   Day trade = Buy 10 AAPL, Sell 10 AAPL

Example 3: Buy, Buy, Buy, Sell, Sell, Sell 

You currently hold 0 shares of AAPL.     

   Buy 5 AAPL     

   Buy 3 AAPL     

   Buy 2 AAPL     

   Sell 1 AAPL     

   Sell 4  AAPL     

   Sell 2 AAPL 

This is one day trade because there is only one change in direction between buys and sells.

   Day trade = Buy 5 AAPL, Buy 3 AAPL, Buy 2 AAPL, Sell 1 AAPL, Sell 4 AAPL, Sell 2 AAPL

More Than One Day Trade

Example 1: One stock 

You currently hold 0 shares of AAPL     

   Buy 100 AAPL     

   Sell 20 AAPL     

   Sell 40 AAPL     

   Buy 10 AAPL     

   Sell 10 AAPL 

This constitutes two day trades, as there were two changes in direction. 

   Day trade 1 = Buy 100 AAPL, Sell 20 AAPL 

   Day trade 2 = Buy 10 AAPL, Sell 10 AAPL 

Example 2: Two stocks 

You currently hold 0 shares of AAPL or NFLX   

   Buy 100 AAPL     

   Buy 20 NFLX     

   Sell 40 AAPL     

   Sell 10 AAPL     

   Sell 10 NFLX      

This constitutes two day trades – there were two changes in direction, one per stock. 

   Day trade 1 = Buy 100 AAPL, Sell 40 AAPL

   Day trade 2 = Buy 20 NFLX, Sell 10 NFLX 

Example 3: Across multiple trading days 

You currently hold 0 shares AAPL or NFLX      

   Buy 100 AAPL (Monday)     

   Sell 40 AAPL (Monday)     

   Sell 10 AAPL (Tuesday)     

   Buy 20 NFLX (Wednesday)     

   Sell 10 NFLX (Wednesday) 

This constitutes two day trades (one on Monday and one on Wednesday) as a change in direction within the same day occurred twice within a five trading day period.

   Day trade 1 (Monday) = Buy 100 AAPL, Sell 40 AAPL

   Day trade 2 (Wednesday) = Buy 20 NFLX, Sell 10 NFLX

Disclaimer
Stake, trading as Stakeshop Pty Ltd, is not obligated to provide advance notice or guidance regarding day trading activity. Customers who engage in day trading are responsible for understanding and complying with all applicable regulations and tax obligations.