| A pattern day trader, under the definition of the | | | | days or until the minimum equity required is |
| United States Securities and Exchange Commission, is | | | | re-established. |
| a trader who executes at least four day trades | | | | There have been arguments from various sectors of |
| within five business days. These day trades should be | | | | the market that the establishment of these rules |
| more than six percent of the client's total trading | | | | hinders the basic philosophy of a free market. Some |
| activity for the same five-day period for the trader | | | | have also asserted that the rules actually enhance |
| to be called a pattern day stock trader. | | | | the risks faced by a day trader, particularly in |
| Because of the numerous activities, pattern day | | | | situations when the unexpected decrease in equity |
| traders are relatively more exposed to intraday and | | | | price occurs. |
| day trading risks. Consequently, these traders are | | | | Despite the risks and stringent rules to day trading, a |
| made subject to specific rules and restrictions. One | | | | lot of traders are drawn into the profession because |
| of these rules is maintaining a minimum of $25,000 | | | | of the alleged potential profit that can be made from |
| equity balance in a margin account. If the day trader's | | | | it. A lot of people, particularly those who are not so |
| account falls below the required minimum, he or she | | | | adept in stock trading, have the impression that day |
| needs to restore the required amount through cash | | | | trading is a quick way to make a lot of money. |
| deposits or marginable equities within five days of | | | | However, market analysts have warned that this isn't |
| going below the requirement. | | | | so, and some of them even argued that the risks do |
| Pattern day trading is considered a very risky style | | | | not justify whatever potential benefit can be gained |
| of market trading. Because of this, the Securities and | | | | from day trading. |
| Exchange Commission has established numerous rules | | | | Being a pattern day trader has its advantages and |
| to address intraday risks. One of these rules requires | | | | disadvantages. The debate on whether this is a |
| that a trader's maintenance margin be deposited in | | | | profitable endeavor is still on-going. One thing is for |
| customer accounts in amounts enough to support | | | | sure, though, day trading should not be chosen as a |
| the risks associated with day trading. Moreover, if | | | | profession unless a trader has thoroughly studied the |
| the minimum amount required is not met, the day | | | | market and weighed the pros and cons of this |
| trading power of the trader will be frozen for 90 | | | | practice. |