*Stock trading, countries: UK only.
What is Pattern Day Trading (PDT)?
When a particular security is bought and sold on the same trading day, it is known as a ‘’day trade’’. An investor who executes more than 3 day trades within the span of 5 trading days is subject to Pattern Day Trading rules which are put in place by the Financial Industry Regulatory Authority (FINRA). If these rules are breached, then the investor’s account is suspended for 90 days.
Why does this apply to Shares customers?
Our service provider, Alpaca, is regulated by the Financial Industry Regulation Authority (FINRA) and therefore all Shares users are subject to Pattern Day Trading rules.
What’s our PDT policy?
We don’t want to suspend the trading accounts of our community and therefore we have implemented a control which will prevent you from executing more than 3 day trades within 5 trading days and as such you won’t be able to execute the sell order of the 4th day trade and won’t have your account suspended.
Here’s an example of Pattern Day Trading activity with Shares
Let's assume Linda is an enthusiastic young trader and performs the following trades using her Shares account:
March 24 - Buy 1 share of TSLA ✅ Sell 1 share of TSLA ✅
March 25 - Buy 1 share of AAPL ✅ Sell 1 share of AAPL ✅
March 26 - Buy 1 share of GOOG ✅ Sell 1 share of GOOG ✅
March 27 - Buy 1 share of COIN ✅ Sell 1 share of COIN ❌
As you can see here, Linda had already performed 3 day trades until March 26 and as she tried to execute the 4th day trade on March 27, she wasn’t able to sell 1 share of COIN. Linda will be able to sell her 1 share of COIN only on March 28th or later.
What to keep in mind
If you are an active trader it is important to be aware of Pattern Day Trading rules and keep a count of the number of day trades you have performed.
Buying and selling the same security on the same trading day counts as a ‘’day trade’’.
Remember to keep a track of the number of day trades that you perform. We’re working on making it easier for you in the Shares app!