What Constitutes a “Day Trade?”

As of May 2017 we’re rolling out changes that will affect how we count day trades with regard to Pattern Day Trading restrictions. We believe these changes will make day trading logic a bit more intuitive for our customers and ultimately reduce the number of people who get restricted because of day trading violations. While most situations remain largely the same, there are some subtle changes customers should be aware of. As a general rule, a day trade can be thought of as a change in direction for a given position. We’ve outlined some common examples below:

 

One Day Trade

One Buy, One Sell

You start with 0 shares of ABC stock.

 

Buy 1 ABC

Sell 1 ABC

 

This is one day trade because you bought and sold ABC in the same trading day. This is a sequence of 1 buy and 1 sell of ABC.

Day Trade: (Buy 1 ABC, Sell 1 ABC)

 

Leading Sell

You start with 10 shares of ABC stock.

 

Sell 10 ABC

Buy 5 ABC

Sell 5 ABC

 

Because your first transaction for ABC stock was selling ABC that you held overnight, it doesn’t count toward your day trades. This is one day trade.

Day Trade: (Buy 5 ABC, Sell 5 ABC).

 

Non-Leading Sell

You start with 10 shares of ABC stock.

 

Buy 1 ABC

Sell 10 ABC

 

Despite already owning 10 shares of ABC, our system will look at this and say that you opened a new position in ABC with the initial purchase. This is one day trade.

Day Trade: (Buy 1 ABC, Sell 10 ABC)

 

Multiple Buys & Sells

You start with 0 shares of ABC stock.

 

Buy 1 ABC

Buy 2 ABC

Buy 7 ABC

Sell 1 ABC

Sell 5 ABC

Sell 4 ABC

 

This is one day trade because there is only one change in direction between buys and sells.

Day trade: (Buy 1 ABC, Buy 2 ABC, Buy 7 ABC, Sell 1 ABC)

 

Two Day Trades

2x Buy And Sell

You start with 0 shares of ABC stock.

 

Buy 50 ABC

Sell 15 ABC

Sell 35 ABC

Buy 10 ABC

Sell 10 ABC

 

This is two day trades because there are two changes in directions from buys to sells.

Day trade 1: (Buy 50 ABC, Sell 15 ABC, Sell 35 ABC)

Day trade 2: (Buy 10 ABC, Sell 10 ABC)

 

Selling More Than You Bought Intraday

You start with 10 shares of ABC stock.

 

Buy 10 ABC

Sell 20 ABC

Buy 1 ABC

 

This is a new case and requires some explanation. This situation will count as two day trades because the customer opened by buying 10 shares of ABC stock and then selling more shares than they bought today. When the customer buys 10 shares, the system disregards the 10 shares already held in the account and reads it as opening a position of positive 10. Selling 20 shares closes the intraday position of positive 10 and opens an intraday position with a value of negative 10. The final purchase of 1 share is then considered a change in direction and thus a second day trade.

 

Day trade 1: (Buy 10 ABC, Sell 20 ABC)

Day trade 2: (Sell 20 ABC, Buy 1 ABC)

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