RiskPicksWhat is the PDT Rule?
The Pattern Day Trader (PDT) rule was a FINRA regulation that defined any margin account making 4 or more day trades in 5 business days as a "Pattern Day Trader" and required it to hold at least $25,000 in equity. The rule was created in 2001 after the dot-com crash to slow down retail day trading in small margin accounts.
April 2026 overhaul
On April 14, 2026 the SEC approved FINRA's rewrite of Rule 4210. The PDT designation is retired and the $25,000 floor is gone. The new framework has three parts:
- $2,000 margin minimum. Any margin account that meets the standard Rule 4210 equity threshold can day trade, with no special day-trader designation
- No trade counting. The 4-in-5 test and the 90-day liquidation-only penalty are both gone
- Real-time intraday margin. Brokers now monitor the actual risk of open positions through the trading day and issue margin calls when position risk breaches maintenance thresholds (roughly 25% of outstanding position value), rather than when you hit an arbitrary trade count
What the old rule did
- Applied to margin accounts only (cash accounts were always exempt)
- A day trade meant opening and closing the same position the same day
- Once flagged, the account was restricted to closing trades only for 90 days unless the trader deposited enough to reach $25,000
Rollout
Brokers have up to 18 months from the SEC approval to replace their legacy systems with the new intraday margin engines. A handful will switch over quickly. Others will keep enforcing the old $25,000 floor internally until their systems catch up. Check directly with your broker before assuming a small account can day trade there today.
Cash accounts
A cash account was never subject to the PDT rule and still isn't. The tradeoff is settlement: after you sell, you wait one business day (T+1) for the proceeds to clear before you can redeploy that capital.
What this means for small accounts
The legal barrier to day trading just dropped from $25,000 to $2,000. Small accounts still blow up faster than anything else in markets, so the risk-management rules matter more than ever. Use strict position sizing and a 1% risk cap per trade, regardless of account size. The rule change opens the door. Discipline is what keeps the account alive long enough to grow.