YAInvestmentT: Help me understand "Pattern Day Trading..."

[arrfep]

So I'm new to the world of investment, having opened my Scottrade acount just 8 days ago. I've had some good luck and made a couple hundred dollars in just a few days of trading. But then I read the regulations regarding Day Trading and think I might be "breaking the rules."

The NASD definition under rule 2520, defines a pattern day trader as "any customer who executes four or more day trades within five business days, provided the number of day trades is more than 6% of the total trades in the account during that period

If I follow this example, I need to keep $25k in equity in the account, which I most certainly do not have. What I'm not understanding is, I guess, what exactly is a "day trade." Is it simply literally buying and selling the same stock in the same day? If so, does this regulation mean that I can't buy and sell the same stock on the same day more than twice (four trades) w/i a five day period?

Soo confused...can anybody give me a for example that might explain this better? Thanks!

 

[Double Trouble]

You can look up the technical definition of a pattern day trader for specifics, but in layman's terms, a day trade is any trade where you bought and sold the same stock on a single day. So yes, you interpreted that part correctly. When they say 4 trades though, they mean 4 'same day buy sell' transactions in a 5 day period, they don't count the buy and sell as one each.

So basically, if you don't want to be flagged as a day trader, when you reach 3 such transactions in a 5 day period, just wait a day or two before doing it again.

Incidentally, the $25,000 equity requirement is only one of a series of regs applying to day traders.

 

[arrfep]

Okay, got it, thanks. That's what I was hoping it meant.