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→Round trip: Clarified that "round trip" is not just the buying and selling of equities in that order, since it also applies to short sales and other securities (e.g., options). Tags: Mobile edit Mobile web edit |
MichaelMaggs (talk | contribs) Adding local short description: "Type of stock trader", overriding Wikidata description "stock trader who frequently buys and sells a security within the same trading day" |
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{{Short description|Type of stock trader}}
{{Use American English|date=June 2020}}
{{Use mdy dates|date=June 2020}}
{{howto|date=April 2024}}
In the [[United States]], a '''pattern day trader''' is a [[Financial Industry Regulatory Authority]] (FINRA) designation for a [[stock trader]] who executes four or more [[Day trading|day trades]] in five business days in a [[margin account]], provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period.<ref>{{cite web|title=Pattern Day Trader|url=https://www.sec.gov/fast-answers/answerspatterndaytraderhtm.html|website=SEC.gov|publisher=[[Securities and Exchange Commission]]|date=February 10, 2011|accessdate=June 1, 2020}}</ref>
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==Round trip==
A '''round trip''' is the opening and closing of a security position. Whether you buy or sell to open, when you close the position, you’ve completed a round trip.
Day trading refers to buying and then selling or selling short and then buying back the same security on the same day.<ref name="ref7" /> Interpretation for more complex situations may be subject to interpretation by an individual brokerage firm. For example, if you buy the same stock in three trades on the same day, and sell them all in one trade, that can be considered one day trade,<ref name="ref8" /> or three day trades.<ref name="ref9" /> If you buy stock in one trade and sell the position in three trades, that is generally considered as one day trade if all trades are done on the same day. Three more day trades in the next four business days will subject your account to restrictions (you can only close existing positions or purchase with available cash up front) for 90 days, or until you deposit enough to have $25,000 in your account, whichever comes first. Day trading also applies to trading in option contracts. Forced sales of [[securities]] through a [[margin call]] count towards the day trading calculation.
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