Refresh March 30, 2025 3:59 AM ET
Understanding pattern day trading
If you qualify as a pattern day trader under the FINRA Rule 4210, it can affect you in a number of ways.
Learn the basics on pattern day trading
Learn about FINRA Rule 4210
Day trading is the practice of opening and closing an equity or option position (i.e., buying and selling the same stock or option) on the same trading day. A same-day buy and sell, or a same-day sell short and buy to cover, is considered a day trade.
If you make four or more day trades in a rolling five-trading-day period, you will be considered a pattern day trader under these rules. However, if the day trading activity does not exceed six percent of your total trading activity for the five-day period in question, your account may not be designated a pattern day trading account.
If you meet the definition of a pattern day trader, you'll be required to maintain $25,000 equity in your brokerage account at all times. If your account equity falls below $25,000, a day trading minimum equity call will be issued on your account requiring you to deposit additional funds or securities.
In order to meet the $25,000 requirement, your pattern day trade account will earn credit interest on the free credit balance.
As a pattern day trader, you'll be granted day trading purchasing power up to four times your NYSE margin excess.
Pattern day trading status only applies to customers with margin accounts. The day trading rules apply only to the buying and selling of the same stocks or options on the same trading day. They do not pertain to mutual fund or bond trades and are not applicable to positions held overnight or longer.
Note:
Per FINRA Rule 4210, stock and options transactions in cash and retirement accounts are subject to T+1 settlement. In other words, if you sell stock or options held in your account, you may not use the proceeds to purchase another security until one market day after the trade (the settlement date of the sale).
Know if I'm a pattern day trader
You will be considered a pattern day trader under FINRA and NYSE rules if you buy and sell the same stock or option on the same trading day four or more times within a period of five trading days, and this activity makes up more than six percent of your trading activity.
If you meet the definition of a pattern day trader under the guidelines above, you'll see two additional fields called Day Trading Cash purchasing power and Day Trading purchasing power when you view the Balances page.
Day Trading Cash purchasing power: the cash available for you to purchase and sell non-marginable stocks or options intraday
Day Trading purchasing power: the cash available for you to purchase and sell marginable stocks intraday
Note:
If you purchase securities and plan to hold them overnight, be sure to use Regulation T purchasing power figures and not Day Trading purchasing power.
Know the minimum equity requirements for pattern day trading
Regulations call for a $25,000 minimum equity requirement for pattern day traders. This is designed to address the additional risks inherent in leveraged day trading activities, and to ensure you're able to cover any losses incurred in your account from the previous day before you place new day trades.
If your equity falls below $25,000, a day trading minimum equity call will be issued on your brokerage account requiring you to deposit additional cash or securities. Account equity is calculated based on the closing prices of securities on the previous market day.
Important:
If your account equity falls below $25,000, your account will be restricted to closing orders only until the call is met in accordance with FINRA Rule 4210.
Learn how often my pattern day trading status is reviewed
Per FINRA Rule 4210, we are required to review brokerage accounts for pattern day trading status each trading day. If over the preceding five trading days a customer has executed four or more day trades (buying and selling the same stock or option on the same trading day) in the account, he or she will be considered a pattern day trader.
Use my other accounts at E*TRADE as collateral for pattern day trading
You cannot use your other accounts at E*TRADE as collateral for the purpose of meeting equity requirements for pattern day trading. Each day trading account must meet the applicable requirements independently, using the financial resources available in that account.
Know about changes to my purchasing power for pattern day trading
FINRA Rule 4210 allows pattern day traders to use NYSE excess equity (the amount of equity in a margin account in excess of the NYSE maintenance requirement) to calculate day trading purchasing power.
The amount of maintenance margin excess is based on your account positions as of the close of business on the previous day. Pattern day trading purchasing power normally will be four times the NYSE maintenance margin excess, but it will be reduced to two times NYSE maintenance margin excess if you exceed your day trading purchasing power and create a day trading margin call. Day trading margin calls must be met within four business days; otherwise the account will be restricted to cash available. Also note that if your account equity falls below $25,000 at the close of market on any trading day, a day trading minimum equity call will be issued and your account will be restricted to closing orders only.
Bring the equity in my account up to the minimum required for pattern day trading
If you don't meet the minimum requirement right now, you can transfer cash and securities from another E*TRADE brokerage account or from a Morgan Stanley Private Bank account, another brokerage firm, or another bank.
If you have multiple accounts with several brokerage firms, you may want to consider consolidating your accounts with E*TRADE to help meet the minimum equity. If you have more than one account at E*TRADE or have an account at Morgan Stanley Private Bank, you can request an in-house transfer. If you'd like to transfer securities from another brokerage firm, we'll be happy to provide you with the form you need. We also provide instructions for wiring funds to your day trading account.
Remove pattern day trading status from my account
Once an account is identified as a pattern day trading (PDT) account, that designation is intended to remain in effect for the life of the account.
However, according to FINRA Rule 4210, a brokerage firm may remove PDT status from an account after receiving written certification from the account holder that he or she understands the definition of pattern day trading and will not engage in PDT activity in the future. Such requests to remove PDT status can be granted only once in the life of the account.
Learn about day trading margin calls
Under FINRA Rule 4210, in the event that you exceed your day trading purchasing power, we're required to issue a day trading margin call.
If you receive a day trading margin call, you'll have as long as four business days to deposit funds to meet the call. Please be aware that the only way to satisfy a day trading call is to deposit additional funds.
The day after you trigger a day trading margin call, your account will be restricted to day trading purchasing power of two times maintenance margin excess, based on your daily total trading commitment. This restriction will remain in effect for four business days or until the call is met, whichever is earlier. If the day trading margin call is not met by the fourth business day, your account will be further restricted to trading only on a cash-available basis or until the call is met.
Learn about day trading minimum equity calls
Under FINRA rules, Morgan Stanley is required to issue a day trading minimum equity call in the event that the equity in your brokerage account falls below $25,000. If the equity in your margin account is below $25,000 and your account is either already qualified as a Pattern Day Trader account, or 4 round trip trades are executed in your account in a rolling 5 business day period, your account will be restricted to closing orders only. This restriction can be removed by meeting the $25,000 minimum equity requirement.
You can satisfy a day trading minimum equity call in one or more of the following ways:
Avoid a day trading margin call by liquidating all my positions by the end of the day
If you exceed your day trading purchasing power, you will be subject to a day trading margin call, even if you have liquidated all of your positions by the end of the day.
Avoid a day trading margin call by holding positions overnight
If your day trading purchasing power is greater than your regular purchasing power, you may receive a Fed call if you choose to hold a position overnight.
Normal margin equity requirements still apply to your account, so you'll be subject to margin calls if you maintain a debit balance in your margin account.
Learn the holding requirements for deposits made to meet a day trading margin call
Funds deposited to meet a day trading margin call must be held in your account for two days after the deposit has posted. If you deposit a check or make a transfer that requires time to clear your bank, our standard holding times for checks will still apply.
Learn the basics on pattern day trading
- Learn about FINRA Rule 4210
- Know if I'm a pattern day trader
- Know the minimum equity requirements for pattern day trading
- Learn how often my pattern day trading status is reviewed
- Use my other accounts at E*TRADE as collateral for pattern day trading
- Know about changes to my purchasing power for pattern day trading
- Bring the equity in my brokerage account up to the minimum required for pattern day trading
- Remove pattern day trading status from my account
- Learn about day trading margin calls
- Learn about day trading minimum equity calls
- Avoid a day trading margin call by liquidating all my positions by the end of the day
- Avoid a day trading margin call by holding positions overnight
- Learn the holding requirements for deposits made to meet a day trading margin call
Learn about FINRA Rule 4210
Day trading is the practice of opening and closing an equity or option position (i.e., buying and selling the same stock or option) on the same trading day. A same-day buy and sell, or a same-day sell short and buy to cover, is considered a day trade.
If you make four or more day trades in a rolling five-trading-day period, you will be considered a pattern day trader under these rules. However, if the day trading activity does not exceed six percent of your total trading activity for the five-day period in question, your account may not be designated a pattern day trading account.
If you meet the definition of a pattern day trader, you'll be required to maintain $25,000 equity in your brokerage account at all times. If your account equity falls below $25,000, a day trading minimum equity call will be issued on your account requiring you to deposit additional funds or securities.
In order to meet the $25,000 requirement, your pattern day trade account will earn credit interest on the free credit balance.
As a pattern day trader, you'll be granted day trading purchasing power up to four times your NYSE margin excess.
Pattern day trading status only applies to customers with margin accounts. The day trading rules apply only to the buying and selling of the same stocks or options on the same trading day. They do not pertain to mutual fund or bond trades and are not applicable to positions held overnight or longer.
Note:
Per FINRA Rule 4210, stock and options transactions in cash and retirement accounts are subject to T+1 settlement. In other words, if you sell stock or options held in your account, you may not use the proceeds to purchase another security until one market day after the trade (the settlement date of the sale).
Know if I'm a pattern day trader
You will be considered a pattern day trader under FINRA and NYSE rules if you buy and sell the same stock or option on the same trading day four or more times within a period of five trading days, and this activity makes up more than six percent of your trading activity.
If you meet the definition of a pattern day trader under the guidelines above, you'll see two additional fields called Day Trading Cash purchasing power and Day Trading purchasing power when you view the Balances page.
Day Trading Cash purchasing power: the cash available for you to purchase and sell non-marginable stocks or options intraday
Day Trading purchasing power: the cash available for you to purchase and sell marginable stocks intraday
Note:
If you purchase securities and plan to hold them overnight, be sure to use Regulation T purchasing power figures and not Day Trading purchasing power.
Know the minimum equity requirements for pattern day trading
Regulations call for a $25,000 minimum equity requirement for pattern day traders. This is designed to address the additional risks inherent in leveraged day trading activities, and to ensure you're able to cover any losses incurred in your account from the previous day before you place new day trades.
If your equity falls below $25,000, a day trading minimum equity call will be issued on your brokerage account requiring you to deposit additional cash or securities. Account equity is calculated based on the closing prices of securities on the previous market day.
Important:
If your account equity falls below $25,000, your account will be restricted to closing orders only until the call is met in accordance with FINRA Rule 4210.
Learn how often my pattern day trading status is reviewed
Per FINRA Rule 4210, we are required to review brokerage accounts for pattern day trading status each trading day. If over the preceding five trading days a customer has executed four or more day trades (buying and selling the same stock or option on the same trading day) in the account, he or she will be considered a pattern day trader.
Use my other accounts at E*TRADE as collateral for pattern day trading
You cannot use your other accounts at E*TRADE as collateral for the purpose of meeting equity requirements for pattern day trading. Each day trading account must meet the applicable requirements independently, using the financial resources available in that account.
Know about changes to my purchasing power for pattern day trading
FINRA Rule 4210 allows pattern day traders to use NYSE excess equity (the amount of equity in a margin account in excess of the NYSE maintenance requirement) to calculate day trading purchasing power.
The amount of maintenance margin excess is based on your account positions as of the close of business on the previous day. Pattern day trading purchasing power normally will be four times the NYSE maintenance margin excess, but it will be reduced to two times NYSE maintenance margin excess if you exceed your day trading purchasing power and create a day trading margin call. Day trading margin calls must be met within four business days; otherwise the account will be restricted to cash available. Also note that if your account equity falls below $25,000 at the close of market on any trading day, a day trading minimum equity call will be issued and your account will be restricted to closing orders only.
Bring the equity in my account up to the minimum required for pattern day trading
If you don't meet the minimum requirement right now, you can transfer cash and securities from another E*TRADE brokerage account or from a Morgan Stanley Private Bank account, another brokerage firm, or another bank.
If you have multiple accounts with several brokerage firms, you may want to consider consolidating your accounts with E*TRADE to help meet the minimum equity. If you have more than one account at E*TRADE or have an account at Morgan Stanley Private Bank, you can request an in-house transfer. If you'd like to transfer securities from another brokerage firm, we'll be happy to provide you with the form you need. We also provide instructions for wiring funds to your day trading account.
Remove pattern day trading status from my account
Once an account is identified as a pattern day trading (PDT) account, that designation is intended to remain in effect for the life of the account.
However, according to FINRA Rule 4210, a brokerage firm may remove PDT status from an account after receiving written certification from the account holder that he or she understands the definition of pattern day trading and will not engage in PDT activity in the future. Such requests to remove PDT status can be granted only once in the life of the account.
Learn about day trading margin calls
Under FINRA Rule 4210, in the event that you exceed your day trading purchasing power, we're required to issue a day trading margin call.
If you receive a day trading margin call, you'll have as long as four business days to deposit funds to meet the call. Please be aware that the only way to satisfy a day trading call is to deposit additional funds.
The day after you trigger a day trading margin call, your account will be restricted to day trading purchasing power of two times maintenance margin excess, based on your daily total trading commitment. This restriction will remain in effect for four business days or until the call is met, whichever is earlier. If the day trading margin call is not met by the fourth business day, your account will be further restricted to trading only on a cash-available basis or until the call is met.
Learn about day trading minimum equity calls
Under FINRA rules, Morgan Stanley is required to issue a day trading minimum equity call in the event that the equity in your brokerage account falls below $25,000. If the equity in your margin account is below $25,000 and your account is either already qualified as a Pattern Day Trader account, or 4 round trip trades are executed in your account in a rolling 5 business day period, your account will be restricted to closing orders only. This restriction can be removed by meeting the $25,000 minimum equity requirement.
You can satisfy a day trading minimum equity call in one or more of the following ways:
- Deposit additional funds into your account
- Deposit additional securities into your account
- The account equity rises above $25,000 due to market appreciation
Avoid a day trading margin call by liquidating all my positions by the end of the day
If you exceed your day trading purchasing power, you will be subject to a day trading margin call, even if you have liquidated all of your positions by the end of the day.
Avoid a day trading margin call by holding positions overnight
If your day trading purchasing power is greater than your regular purchasing power, you may receive a Fed call if you choose to hold a position overnight.
Normal margin equity requirements still apply to your account, so you'll be subject to margin calls if you maintain a debit balance in your margin account.
Learn the holding requirements for deposits made to meet a day trading margin call
Funds deposited to meet a day trading margin call must be held in your account for two days after the deposit has posted. If you deposit a check or make a transfer that requires time to clear your bank, our standard holding times for checks will still apply.
PLEASE READ THE IMPORTANT DISCLOSURES BELOW.
Trading on margin involves specific risks, including the possible loss of more money than you have deposited. A decline in the value of securities that are purchased on margin may require you to provide additional funds to your trading account. In addition, Morgan Stanley can force the sale of any securities in your account without prior notice if your equity falls below required levels, and you are not entitled to an extension of time in the event of a margin call. When trading on margin, an investor borrows a portion of the funds he/she uses to buy stocks to try to take advantage of opportunities in the market. He/she pays interest on the funds borrowed until the loan is repaid. For each trade made in a margin account, we use all available cash and sweep funds first and then charge the customer the current margin interest rate on the balance of the funds required to fill the order. The minimum equity requirement for a margin account is $2,000. Please read more information regarding the risks of trading on margin.