What is a Day Trader?
As of September 28, 2001 the NASD and NYSE amended their definitions of day traders. A new term that they use is “pattern day trader.” An investor can be classified as a pattern day trader if one of the two following characterizes him or her: 1. He or she trades four or more times during a five-day span or, 2. The firm where the investor is making transactions or opening up a new account reasonably considers him or her a day trader. Once an investor is considered a day trader, the brokerage must classify him or her as such and the investor is then subject to increased equity requirements. Mainly, the brokerage must require a minimum equity of $25,000 at the beginning of the customer’s trading day. This minimum equity requirement has been introduced by the SEC and NYSE. Ensuring that any substantial losses can be offset by the day traders own equity, the requirement addresses the inherent risk posed upon brokerages by leveraged day trading activities. A more restrictive margin rule has
