Pattern day trader rule (PDT)
The pattern day trader rule was FINRA's margin rule for frequent day traders: four or more day trades in five business days made you a pattern day trader, who had to keep at least 25,000 dollars in the account. FINRA replaced it with intraday margin standards effective 4 June 2026, and brokers may phase the change in until 20 October 2027.
Why it matters to a small-cap momentum trader
For years the rule decided how many trades a small account could make. A trader with less than 25,000 dollars got three day trades in any five business days, and a fourth could freeze the account. That shaped how people traded: holding overnight to save a day trade, splitting accounts across brokers, or using a cash account and waiting for money to settle. As of this page's date the rule is gone from FINRA's rulebook, but your broker may still apply it while it phases in the new standard.
The old rule, Rule 4210(f)(8)(B)
Day trade. Buying and selling, or shorting and covering, the same security on the same day in a margin account.
Pattern day trader. A customer who makes four or more day trades within five business days, unless those day trades are six percent or less of the account's trades in that period.
Minimum equity. At least 25,000 dollars in the account on any day the customer day trades. Below it, no day trading until the account is back above.
Buying power. Up to four times the maintenance margin excess for day trades, with a day-trading margin call if it was exceeded.
The rule depends on the date: Regulatory Notice 26-10
- Before 4 June 2026: the pattern day trader rule above applied at every FINRA member broker.
- From 4 June 2026: the new intraday margin standards are in effect. They drop the pattern day trader label and the 25,000-dollar minimum, and instead compare the account's equity with its market exposure during the day. If the account runs an intraday margin deficit, it must be met as promptly as possible; an account that keeps failing to meet deficits can lose margin trading for 90 days or until the deficit is met.
- Until 20 October 2027: brokers that need more time may phase in the new standard, so some may still apply the old limits during that window. Ask yours.
Trading on margin still needs at least 2,000 dollars of equity. In a cash account there was never a pattern day trader rule, but buying and selling before paying for the shares is free-riding under Regulation T, and trades settle the next business day.
PDT in Hindsight Markets
The rule is off by default, because FINRA has retired it. You can turn it on in Account settings to practise the old discipline. When it is on, an account under 25,000 dollars that has used three day trades is refused a fourth. The count runs within one replay, so it is more forgiving than the real five-day window.
A worked example: the old count
An illustration, not anyone's real account. The old rule, before 4 June 2026.
The account. A margin account with 18,000 dollars, under the 25,000 minimum.
The week. Monday: one round trip in one stock. Tuesday: two. That is three day trades in the five-day window.
Wednesday. A fourth day trade would make the account a pattern day trader with less than 25,000 dollars, so the broker would restrict it. The trader either holds the position overnight or does not take the trade.
The 6% test. If the same account had made 80 trades that week, four day trades would be 4 ÷ 80 = 5% of them, six percent or less, and would not have made it a pattern day trader.
Common mistakes traders make with the PDT rule
- Assuming your broker has switched. The new standard is effective, but brokers may phase it in until 20 October 2027. Check your own broker's rules.
- Reading the change as unlimited leverage. Intraday margin still limits how much exposure your equity can carry, and repeated deficits freeze margin trading.
- Free-riding in a cash account. Selling shares bought with unsettled money breaks Regulation T, rule change or not.
- Holding overnight to save a day trade. Under the old rule this turned planned scalps into overnight risk on small caps that gap.
Common questions
- Is the pattern day trader rule gone?
- FINRA replaced it with new intraday margin standards effective 4 June 2026, in Regulatory Notice 26-10. Brokers that need more time may phase the change in until 20 October 2027, so some may still apply the old limits.
- When did the PDT rule change?
- FINRA published the change on 20 April 2026, after SEC approval, and it took effect on 4 June 2026. The phase-in period for brokers runs until 20 October 2027.
- What replaced the pattern day trader rule?
- Intraday margin standards: the broker compares the account's equity with its market exposure during the day. A shortfall is an intraday margin deficit, to be met as promptly as possible, and repeated failures can freeze margin trading for 90 days.
- How many day trades did the PDT rule allow?
- Under 25,000 dollars, three in any five business days in a margin account. A fourth made the account a pattern day trader, and with too little equity it was restricted.
- Did the PDT rule apply to cash accounts?
- No. It was a margin rule. Cash accounts are limited instead by settlement: you cannot sell shares bought with money that has not settled without free-riding.
How to practise it in Hindsight Markets
- Open Account settings and set a starting balance and an intraday margin multiplier like your own account's.
- To practise the old rule, tick Enforce the legacy Pattern Day Trader rule and keep the balance under 25,000 dollars.
- Add the PDT figure to the Account window: it counts the day trades you have used.
- Open a past trading day and plan your three best trades before the open.
- In the journal, compare those three with the trades you would have taken without the limit.
Practice this on a real past day in Hindsight Markets
Set your own balance and leverage, turn the old PDT rule on if you want the discipline, and trade a real past day with simulated money.