What is pattern day trading?

Pattern day trading rules were put in place by FINRA to limit day trading.

What is the rule?
You will be considered a pattern day trader if you “day trade” 4 or more times within 5 business days and your day trading activities are greater than 6 percent of your total trading activity for that same 5 day period. A “day trade” is defined as buying then selling or selling short, then buying the same security on the same day. Just buying a security, without selling it later that same day, would not be considered a day trade.

What are the implication of getting classified as a pattern day trader?
If you are designated as a pattern day trader, a $25,000 minimum equity requirement must be deposited in the account prior to any day-trading activities and maintained in your account at all times. If the account falls below the $25,000 requirement, you will not be permitted to day trade until you deposit cash in the account to restore the account to the $25,000 minimum equity level.

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