Pattern day trading is more than just frequent buying and selling throughout the day. It’s an official status only for margin accounts that meet certain trading criteria.
First, let’s define a Day Trade. A Day Trade is when you buy and sell (or sell short and buy) the same security in the same market day. We’ll call this a “round trip.” If you make four or more round trips within a 5 market day period, you will be designated as a pattern day trader even if each of the four round trips is done with a different security.
Once you’re designated as a Pattern Day Trader, we are required by security regulations to treat your account a little differently. The biggest impact to you is with your margin status. With the Pattern Day Trader flag, your minimum account equity (if you want to continue to use margin) is $25,000. If your equity falls below that level, your account will be treated as a cash account (no margin available).
Tip: Pattern day trader accounts are not eligible for instant withdrawals to Capital One 360 accounts and require electronic transfers instead