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I am kind of new to day trading stocks. I was just a bit confused regarding the pattern day trade rule which prevents people with under $25,000 to exceed 3 day trades per week.

Does the $25,000 have to be in cash or does it also include the margin which the brokerage firm offers?

Assuming it all has to be my cash not margin, I would like to present a situations and would love to know your opinion:

I ran out of 3 day trades and on my 4th trade of the week I buy 24,000 worth of stocks with my cash and sell them at 25,000, because I am > 25,000 will they remove my previous 3 day trades flag and reset it to zero?

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2 Answers 2

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The $25,000 amount is for equity in your brokerage account (cash and investments). It does not include any margin amount that has been loaned to you.

To answer your second question, I think you are misunderstanding the concepts behind the pattern day trader rules. Your brokerage account is either considered a "pattern day trader" or it is not. Once you are flagged as a pattern day trader, you will be required to maintain this $25,000 equity amount or you will not be allowed to trade.

You are flagged as a pattern day trader as soon as you day trade a fourth time in any 5-day period. It doesn't matter what your equity happens to be during that period. And once you are flagged as a pattern day trader, you will be required to maintain that $25,000 equity amount indefinitely.

You should study the page that FINRA put together about day-trading:

Day-Trading Margin Requirements - Know the Rules

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  • Now I understand, thank you very much. Thank's for sharing the link it went over many of the questions I forgot to ask.
    – InWoods
    Dec 21, 2016 at 23:14
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The requirement is equity, meaning it does not include your margin.

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