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Which of the following satisfy the pattern day trading rule?

Personal Finance & Money Asked by Waqas Sarwar MVP on February 22, 2021

I have confusion about the day trading rules. From below scenario, which is pattern day trading?

  1. I bought 1 Apple share in pre-market and sell it in the after-market hours (within same day).
  2. I bought 1 Apple share around 11AM and sell it in the after market hours (around 6PM)
  3. I bought 1 Apple share in after-market hours (5PM) and sell it tomorrow in pre-market (8AM)
  4. I bought 1 Apple share in after-market hours (5PM) and sell it tomorrow in regular market (11AM)
  5. I bought 1 Apple share in after-market hours (5PM) and sell it tomorrow in after-market (6PM)

One Answer

Day trading is the buying and selling a financial instrument within a single trading day.

Based on that definition, there should be no confusion. Trades 1 and 2 are day trades and trades 3, 4 and 5 are not.

The Pattern Day Trader rule allows 3 day trades in a rolling five business day period in a margin account, provided the number of day trades are more than six percent of the total trading for that five-day period.

There is no limit to how many day trades that you can make in a cash account as long as you are using settled funds.

Correct answer by Bob Baerker on February 22, 2021

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