What is a day trade?
A day trade is when you open and close the same position on the same calendar day. For example, buying a stock and then selling it later that same day.
When is an account flagged as a Pattern Day Trader?
An account is flagged as a Pattern Day Trader if it completes four or more day trades within five business days. Fewer than four trades within that window will not trigger status. Day trades count regardless of share size or frequency.
How does the rule work at DolarApp?
To help you avoid being flagged as a Pattern Day Trader, once you reached three day trades, you can't execute a trade that would count as a fourth day trade. You can still buy and sell assets as long as the trade does not trigger a day trade.
Examples
Example A:
09:30 Buy 250 ABC
09:31 Buy 250 ABC
13:00 Sell 500 ABC
→ 1 day trade
Example B:
09:30 Buy 100 ABC
09:31 Sell 100 ABC
09:32 Buy 100 ABC
13:00 Sell 100 ABC
→ 2 day trades
Example C:
09:30 Buy 500 ABC
13:00 Sell 100 ABC
13:01 Sell 100 ABC
13:03 Sell 300 ABC
→ 1 day trade
Example D:
09:30 Buy 250 ABC
09:31 Buy 300 ABC
13:01 Buy 100 ABC
13:02 Sell 150 ABC
13:03 Sell 175 ABC
→ 1 day trade
Example E:
09:30 Buy 199 ABC
09:31 Buy 142 ABC
13:00 Sell 1 ABC
13:01 Buy 45 ABC
13:02 Sell 100 ABC
13:03 Sell 200 ABC
→ 2 day trades
Example F:
09:30 Buy 200 ABC
09:30 Buy 100 XYZ
13:00 Sell 100 ABC
13:00 Sell 100 XYZ
→ 2 day trades
For more details, visit Regulatory Notice 21-13 | FINRA.org