What exactly are the limitations of the Pattern Day Trading rule?
Hey Tim. In many of your DVDs you explain the PDT rule to be a limitation of 3 trades per 5 day period. A trade being defined as a buy, sell, sell short, or buy to cover (in one financial instrument). I have been researching the issue, and according to some resources a trade is defined as a buy and a sell together within one day(in one financial instrument). And a short sell and buy to cover within one day is considered a trade. While both are limiting factors, one is much more agreeable than the other. I am paper trading at the moment, and I want to simulate as accurately as possible my limitations. If I am able to buy and sell as a trade, it makes the PDT less confining than if each action is individually counted as a trade. Could you refer me to any specific SEC articles or legislation to verify the actual limitation so the PDT rule? Thank you for your time.
Interactive Brokers have a section on their homepage that explains the PDT, offers a FAQ and has examples: http://www.interactivebrokers.com/en/p.php?f=margin&p=dt&p2=daytrade1
The official FINRA and NYSE rules are linked on the following SEC page: http://www.sec.gov/answers/daytrading.htm
The key is shorting breakdowns/buying breakouts in the afternoon and holding overnight when under this rule...when I was growing my $12k into $120k the past 2 years, it took me 9 months just to get from 12k to 25k...friggin annoying but it's a good test as to whether you can make consistent profits
