What is pattern day trading (PDT)?

Learn what PDT means and how to avoid breaking the rule

Christine avatar
Written by Christine
Updated over a week ago

What is Pattern Day Trading?

Pattern Day Trading can be simply defined as when a trader carries out a day trade four or more times in five business days.

What is a Day trade?

A day trade is when a buy and sell order of the same stock is executed in one trading day.

Who is a Pattern Day Trader?

A Pattern Day Trader (PDT) is an individual that completes 4(four) “day trades” within a rolling 5-business day period.

A trader is not allowed to buy and sell the same company's stocks more than 4 times within 5 consecutive business days.

For example:

As a trader, if you buy Netflix stocks on Monday and sell it on that same day, that's called a day trade. If you carry out the same action(for Netflix or any other company) on Tuesday and Wednesday, you would have used up all your day trades (3-day trades).

If you then try to buy and sell Netflix(or any other company's) stock again within the 5-business day period (i.e Thursday and Friday), your account would be flagged for Pattern Day Trading and subsequently banned from trading stocks on Chipper for 180 days.

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