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What is Pattern Day Trading
Tags - trading stocks
Before you start trading you should get familiar with different aspects and types of trading. And before setting your financial goals , there’s one important term you should know about - Pattern Day Trading. This term sets some limits to your day trading activities if you are starting with just a small capital, lets say $5k or less.
If you think you make 10 trades per day without any problems with your $5k starting capital, then think again. Doing 10 trades per day would make me a Pattern Day-Trader. Basically a pattern day-trader is a trader who makes more than 3 day trades (buys and sells the same stock during the same day) within a 5 day period. Click here for some more information about it.
And for pattern day traders there are certain rules. Under the rules of NYSE and NASD, to make more than 3 day trades during any 5 day period you HAVE TO HAVE at least $25 000 on your account at all times.
So with $5000 you can only make 3 DAY TRADES within a week. This of course is far from my expectations/initial ideas (10 trades a day...), but I guess from learning experience this is only good. There’s lots to learn before you can actually start investing and I hope I can help along the way as much as possible.
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