Hi, moomooers, we notice that many of you have problems regarding PDT (Pattern Day Trader). PDT is a basic rule but important. Today, we will go through it with an explanation and solution.
What is PDT?
Firstly, we should be clear that PDT is a term defined by FINRA (Financial Industry Regulatory Authority). It refers to any trader who executes 4 or more “day trades” within 5 business days using the same account. Under FINRA rules, traders, who are marked as PDT, must have at least $25,000 in their accounts and can only trade in margin accounts.
What is day trade?
A day trade is defined as buying then selling or selling short then buying the same security on the same day. Simply purchasing and holding a security would not be regarded as a day trade. If you sell short and then buy to cover on the same day, it will be considered a day trade. The day-trading margin rule applies to day trading in any security, including options. Futu does not promote day-trading.
How to know my day trade left?
You can view "Day Trade Left (T, T+1, T+2, T+3, T+4)" in your account page, where shows the number of day trades available for your account in the next 5 business days. Please note that if the market has closed, "T" represents the next trading day, otherwise, it represents today.
Example 1: Now your "Day Trade Left" displays (0, 0, 2, 2, 3), and we assume that today is Monday. The account will have 0 day trades available Monday and Tuesday. To avoid being marked as a pattern day trader, you can't make any day trade in these 2 days. On Wednesday and Thursday, 2 day trades will be available. If those 2 trades are not used, your account will have all 3 day trades available on Friday.
Example 2: Now your "Day Trade Left" displays (1, 1, 2, 2, 3), and we assume that today is Wednesday. The account will have 1 day trade available on Wednesday and Thursday. On Friday and next Monday, 2 day trades will be available. If those 2 trades are not used, your account will have all 3 day trades available next Tuesday.
What if I was marked as a PDT?
When you are marked as a PDT (Pattern Day Trader), you will not be allowed to open new positions for 90 business days unless your equity value reaches at least $25,000. That amount need not necessarily be cash; it can be a combination of cash and eligible securities.
If you believe that you are falsely marked as PDT, you can email our customer service (email@example.com) and explain. We will evaluate your day trades and decide whether to reset your PDT mark.
If you are indeed a PDT, you need to keep your equity value at least $25, 000. If you are marked as a PDT and your equity value is more than $25, 000, you can trade up to your day-trading buying power, which will be four times your maintenance margin excess as of the close of the previous trading day.
How to avoid being marked as PDT?
By switching on option "Pattern Day Trade Protection", you will be notified when you are making a second or third day trade in 5 trading days. You will also be notified when you are placing orders which might mark you as a PDT. However, this protection cannot guarantee that you won’t be marked as a PDT, since liquidation can also lead to a day trade.
You can set "Pattern Day Trade Protection" following the steps:
"Settings" → "Trade Preference" → "Order Settings" →switch on "Pattern Day Trade Protection".
What to expect in the future update?
In the future update, you can directly apply for a reset via submitting an application through our day-trading page, no needs to send emails. This page is where you can view your day-trading records. Let's keep updated!
Thanks for reading. If you have any further questions, please leave comments below.