Day Trading is defined as buying and selling the same security within the same trading day. So, if you buy 100 shares of AAPL at 9:00 am and sell 100 shares of AAPL at 2:00 pm - you've just executed a day trade. Once you've executed at least four day trades within five consecutive business days your brokerage firm will tag your account as a "PDT" or a Pattern Day Trader.
Being tagged a PDT is not necessarily a problem unless you have less than $30,000 in your account, depending upon the firm's minimum. The legal minimum set by the SEC is $25,000 but it is within the broker's discretion to raise that amount. If you are considering becoming a day trader, contact your brokerage firm to determine the minimum account balance restrictions.
Should you be tagged as a Pattern Day Trader and do not have the minimum in your account on the day you've executed your fourth day trade, you'll be sent an Equity Call from your broker asking you to make a deposit to raise your account to the set minimum. If you don't have the funds and it is the first time you've been tagged a PDT, then simply send your brokerage firm an e-mail or letter stating that you do not have the funds to deposit to your account and that you intend to reduce or cease your day trading activities in the future. Then, request that your PDT designation be removed along with any holds that might have been placed on your account. Most firms will respond positively to this request as they have a one-time-exemption policy.
You might even want to call a service representative to confirm the process of removing your PDT status as all brokerage firms' procedures are different. If you can, try to send an e-mail and not a paper letter so that you are up-and-running as soon as possible.
Here would be a nice example of a request to remove your PDT status:
"Thank you for the notification of my Pattern Day Trader Status. I understand the restrictions involved in being a PDT and given that I do not have the capital to keep my equity at or above $30,000 I would like to state that I will reduce my day trading activities significantly in the future and would like my coding as a Pattern Day Trader to be removed. Additionally, if any locks or holds have been placed on my account please do remove them so that I might resume trading. Please notify me if I need to take any further action."
If this is your second time to be deemed a PDT and you do not have the minimum required balance you'll be sent another Equity Call. If you cannot raise your account balance then your margin will be restricted and you'll only be able to trade long in your account. You will not be able to short sell any securities since short selling requires active margin. You might also have a hold on your account that will need to be removed. Call your broker to discuss your options.
Source : azinearticles
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