I always see tons of questions in chat about the PDT (Pattern Day Trader) rule and how it works. It's good to always do your own due diligence to find the answers you're looking for. But I thought this might be a helpful guide to those that have no clue what it is or how it works.

Please note that you will often encounter different answers from different customer service reps and brokers. I once spoke to a customer service rep from etrade who told me that if I were to buy x amount of shares of x stock and were to try to sell the shares I bought in multiple parts on the same day, it would cost me more than one day trade. However, I didn't think that was true so I asked for a supervisor who put me on the line with an actual broker/day trader form etrade who confirmed what the rep was telling me was incorrect. The point is, keep asking, keep learning. You have nothing to lose by asking (even more than once if you need to).

That said, here are some things I've learned after asking over and over and over multiple times with different brokers (etrade and tda).

 

First off -> Here's the source for PDT information:

What it is -> FINRA Information: http://www.finra.org/investors/day-trading-margin-requirements-know-rules

 

Who does this affect?: U.S. Broker accounts with an account size of under $25,000.00 USD

 

Who's not affected?:

1. Offshore Brokers (Non-U.S. based brokers)

2. U.S. Broker accounts with an account size of over $25,000.00 USD

3. Cash Accounts (But you do have to wait for your money to come back to your account which can take up to 2 (aka T+2) business days)

 

In regards to Cash Accounts:

This is directly from the FINRA website linked above:

"Does this rule change apply to cash accounts?

Day trading in a cash account is generally prohibited. Day trades can occur in a cash account only to the extent the trades do not violate the free-riding prohibition of Federal Reserve Board's Regulation T. In general, failing to pay for a security before you sell the security in a cash account violates the free-riding prohibition. If you free-ride, your broker is required to place a 90-day freeze on the account."

 

Examples:

Some different examples of what counts and doesn't count as a day trade.

Note: Pay attention to the dates below

 

Long Positions

Example #1

Buy 100 shares of ABC on June 1, 2017 - Position open

Sell 50 shares of ABC on June 1, 2017 - Remaining position still open

Sell 50 shares of ABC on June 1, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and closed on the same day.

 

Example #2

Buy 5000 shares of ABC on June 1, 2017 - Position open

Sell 2500 shares of ABC on June 1, 2017 - Remaining position still open

Sell 2000 shares of ABC on June 1, 2017 - Remaining position still open

Sell 500 shares of ABC on June 1, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and closed on the same day.

 

Example #3

Buy 5000 shares of ABC on June 1, 2017 - Position open

Sell 5000 shares of ABC on June 2, 2017 - Position closed

Day Trade Count: 0

Why? Because the position was not opened and closed on the same day.

 

Example #4

Buy 5000 shares of ABC on June 1, 2017 - Position open

Sell 2500 shares of ABC on June 1, 2017 - Remaining position still open

Sell 2500 shares of ABC on June 2, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and partially closed on the same day. The sell of the remaining shares on the following day will not add another day trade.

 

Example #5

Buy 5000 shares of ABC on June 1, 2017 - Position open

Sell 2000 shares of ABC on June 1, 2017 - Remaining position still open

Sell 3000 shares of ABC on June 2, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and partially closed on the same day. The sell of the remaining shares on the following day will not add another day trade.

 

Example #6

Buy 5000 shares of ABC on June 1, 2017 - Position open

Cancel Buy Request 5000 shares of ABC on June 1, 2017 - Pending

3000 shares of ABC on June 1, 2017 still gets executed from your initial Buy order even though you requested it to be canceled - Position open

Sell 3000 shares of ABC on June 1, 2017 - Position closed

Day Trade Count: 1

Why? Even though you requested a cancel of your initial buy order, it was a 'request' to cancel only and you still have to wait for your request to be executed. If shares from your initial buy order still get executed before your request to cancel them gets executed - Guess what?!? You're the happy new owner of the shares from your buy order that got executed. In this case, 3000 shares of your initial buy order still gets executed and 2000 shares of your initial buy order request are cancelled. In this example the 3000 shares (that you didn't want since you requested to cancel) was still executed and you sold them on the same day you purchased them. Therefore you accrue a day trade.

 

Short Positions

Example #1

Short 100 shares of ABC on June 1, 2017 - Position open

Buy to Cover 50 shares of ABC on June 1, 2017 - Remaining position still open

Buy to Cover 50 shares of ABC on June 1, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and closed on the same day.

 

Example #2

Short 5000 shares of ABC on June 1, 2017 - Position open

Buy to Cover 2500 shares of ABC on June 1, 2017 -Remaining position still open

Buy to Cover 2000 shares of ABC on June 1, 2017 - Remaining position still open

Buy to Cover 500 shares of ABC on June 1, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and closed on the same day.

 

Example #3

Short 5000 shares of ABC on June 1, 2017 - Position open

Buy to Cover 5000 shares of ABC on June 2, 2017 - Position closed

Day Trade Count: 0

Why? Because the position was not opened and closed on the same day.

 

Example #4

Short 5000 shares of ABC on June 1, 2017 - Position open

Buy to Cover 2500 shares of ABC on June 1, 2017 - Remaining position still open

Buy to Cover 2500 shares of ABC on June 2, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and closed on the same day.

 

Example #5

Short 5000 shares of ABC on June 1, 2017 - Position open

Buy to Cover 2000 shares of ABC on June 1, 2017 - Remaining position still open

Buy to Cover 3000 shares of ABC on June 2, 2017 - Position closed

Day Trade Count: 1

Why? Because the position was opened and partially closed on the same day. The buy to cover of the remaining shares on the following day will not add another day trade.

 

Example #6

Short 5000 shares of ABC on June 1, 2017 

Cancel Request Short order of 5000 shares of ABC on June 1, 2017

3000 shares of ABC on June 1, 2017 still gets executed from your initial Short order even though you requested it to be canceled - Position open

Buy to Cover 3000 shares of ABC on June 1, 2017 - Position closed

Day Trade Count: 1

Why? Even though you requested a cancel of your initial short order, it was a 'request' to cancel only and you still have to wait for your request to be executed. If shares from your initial short order still get executed before your request to cancel them gets executed - Guess what?!? You're the happy new owner of the shares from your short order that got executed. In this case, 3000 shares of your initial short order still gets executed and 2000 shares of your initial short order request are cancelled. In this example the 3000 shares (that you didn't want since you requested to cancel) was still executed and you bought to cover them on the same day you shorted them. Therefore you accrue a day trade.

 

I will update this if I find any inaccuracies later ... just got off work so I'm tired so my apologies if there are any errors but I did my best to double check. Hope this helps someone! :)