If you make a pattern of opening and closing a position on the same trading day, you may become subject to additional regulations as a pattern day trader.

What is a day trade? A day trade occurs when you buy and sell (or sell and buy) the same stock during the same trading day. The trading day includes all pre-market, normal trading hours, and extended session hours. Selling a position that you held overnight and reacquiring the position the following day is not considered a day trade.

What is a pattern day trader? An account is identified as a pattern day trader when it executes four or more day trades in any five consecutive trading days.

What regulations apply to a pattern day trader? Once your margin account is identified as a pattern day trader, regulations subject it to a minimum equity requirement of $25,000. If the account does not have this much equity, a day trading minimum equity call is issued. With the higher equity requirement comes the availability of higher leverage through more buying power. If your account is identified as a pattern day trading account, regulations allow us to give you $4 of buying power for each dollar of exchange maintenance excess. This usually means that your day trading buying power can be as much as twice your overnight buying power.

Day trading minimum equity call:
If your account has less than $25,000 equity and is identified as a pattern day trading account, a day trading minimum equity call will be issued. If you make a day trade while your account is below $25,000 your account will be restricted to closing transactions only for 90 days and you may generate an even greater day trading call.

What is day trade buying power? Traditional, overnight buying power is the maximum amount that may be used to open positions that are then held overnight. Day trade buying power is the amount of funds available for day trading, and is provided with the understanding that it is to be used only for day trading activities. Please note: Since we have no way of determining whether or not you will hold a position overnight or just for a day trade, orders will be accepted based on your day trading buying power. It’s your responsibility to remain within your maximum buying power. If your account uses day trade buying power and holds the position overnight, it may cause a maintenance call or Reg T call (see previous section, on Margin Calls), and may therefore be subject to immediate liquidation by us with no notice to you.

Day trading call:
If your account meets the minimum equity requirements for day trading and exceeds the day trading buying power on executed day trades, a day trading call will be issued. Once a day trading call is issued, your day trading buying power is restricted to two times margin maintenance excess until the call is met. Multiple day trading violations may result in a restriction limiting transactions to a cash available basis. Day trading calls can be met by depositing cash or fully paid securities only, you cannot liquidate securities to meet a day trading call. Funds deposited in an account to satisfy a day trading call must be left in the account for at least 48 hours and are also subject to our clearance policies on deposits.