The Pattern Day Trader (PDT) rule is one of the most misunderstood rules in retail investing. It sounds alarming when you first hear it, but it's straightforward once you know how it works.
What the PDT rule says
FINRA's Pattern Day Trader rule states: if you make four or more day trades in a rolling five-business-day period in a margin account, you are classified as a pattern day trader and must maintain a minimum account balance of $25,000.
A day trade is counted when you buy and sell (or sell short and buy to cover) the same security in the same trading day.
Who it applies to
The PDT rule only applies to margin accounts at US broker-dealers. It does not apply to:
- Cash accounts
- Accounts outside the US
- Futures, forex, or options on futures
How to avoid it
The simplest way to follow day trades without PDT concern is to use a cash account. Cash accounts have no day trade limit (though your buying power is limited to settled funds). Blue Collar Picks are designed to be followed in a standard cash account — no margin, no special permissions needed.
Alternatively, if you're using a margin account with under $25,000, simply limit yourself to three day trades per rolling five-day period. Since picks come 1–2 times per week, this is easy to stay within.
If you are flagged as a PDT
If your broker flags you as a PDT and your account is below $25,000, you'll typically receive a margin call and may have your account restricted to closing trades only for 90 days. Contact your broker immediately if this happens — many will give a one-time reset.