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What is a Potential Pattern Day Trader?
A “Potential Pattern Day Trader” error occurs when your account meets two conditions:
1. You have made three day trades within a rolling five-business-day period.
2. Your account has a Net Liquidation Value (NLV) under USD 25,000
This message acts as a preventive restriction, even if you do not intend to continue day trading, to ensure your account does not violate SEC Pattern Day Trading (PDT) rules.
Why this restriction occur:
The SEC PDT Rule defines a Pattern Day Trader as someone who executes 4 or more day trades within 5 business days in a margin account.
If your account falls below $25,000 NLV and you've already used 3 day trades, the system automatically blocks you from initiating any new positions.
This applies regardless of whether the new trade would result in a day trade or not.
Remember, this is a protective rule and cannot be overridden or manually lifted.
Timeframe:
You must wait for the rolling 5-day window to reset before your account will allow new position openings.
The restriction is automatically lifted once the 5-day period ends and you are below the day trade threshold.
To avoid the restriction
Maintain a Net Liquidation Value of $25,000 or more
Avoid placing more than 3 day trades in a 5-business-day window
Use a cash account (not subject to PDT rules, but limited by settlement)
