Every pattern day trader works on increasing his profit margin day and night, despite the various restrictions that they must follow while conducting their trade. So what kind of work do they have to do to make sure they cover all the requirements of pattern day trading?
- Trade Limit
A pattern day gets his name when you finally sell four shares or more in a day trade within the rolling five business days. Once, the trade account gets dubbed as a Pattern Day trading account, there is no going back. After getting the account as a pattern day trader, there is a limit on the dollar amount that he can trade in. This is a restriction that they must adhere by because failing to do so will cause the trader to get a margin call that has to be met by the trader within three to five working days.
Once you become a pattern day trader, you have to make sure that there is at least a capital of $25,000 dollars in your account at all times. This is very important because failing to have the required amount of money in the account would result in the trader being denied access into the stock market. So the pattern day trader has to work his trades very cautiously and not go all out.
One of the major advantages of being a pattern day trader is the fact that you can have upto four times the amount of leverage as compared to a normal day trader. Leverage is very common as day traders borrow money to increase their stocks in the hopes of selling it at a high price and paying the interest back. For a pattern day trader, the leverage can be $120,000 instead of $30,000 which will guarantee a higher success rate.