The PDT rule, or Pattern Day Trader rule, is a regulation in the United States that applies to traders who make frequent intraday trades in a margin account. A trader is labelled a pattern day trader when they place four or more day trades within five business days, as long as those trades represent more than six percent of the account’s total activity. Once flagged, the trader must maintain a minimum equity of twenty-five thousand dollars in their margin account to continue day trading without restrictions.

The rule was introduced to limit excessive risk among inexperienced traders who might take rapid losses through constant short-term trading. When the account balance falls below the required threshold, the broker can restrict trading activity or issue a margin call, forcing the trader to deposit additional funds. This requirement aims to ensure that traders engaging in frequent intraday moves have enough capital to handle volatility and settlement risks.

The PDT rule only applies to US-regulated brokers and margin accounts, not cash accounts. A cash account avoids the rule, but trading is limited by settlement times, which reduces flexibility. Many beginners feel frustrated by the restriction, but it pushes new traders to slow down, plan better, and avoid emotional or impulsive trading. Some traders move to futures or forex, where the PDT rule doesn’t apply, but these markets carry their own risks. Understanding the rule helps traders choose the right account type and manage expectations as they build consistency.