Capital and the PDT rule
Lesson 2 · about 8 min
The second thing that decides whether you get to day trade is not skill. It is the account size, and the rules attached to it. This lesson covers the US pattern day trader rule for stocks, the very different margin world of futures, forex and crypto, and how much capital is actually needed to run the risk numbers from Module 7 without the maths breaking.
The pattern day trader rule (US stocks)
FINRA's rule for US margin accounts:
- A day trade is buying and selling (or shorting and covering) the same security in the same day.
- You are a pattern day trader if you make 4 or more day trades in 5 business days, and those trades are more than 6% of your total trades in that window.
- A pattern day trader must keep at least $25,000 in equity in the account at the close of the previous day. Drop below it and the broker will block day trades until you top up.
Cash accounts are not covered by the rule, but they have their own limit: proceeds from a sale must settle (T+1 in the US since 2024) before you can use them again, so a $5,000 cash account can effectively make one or two round trips a day.
At the time of writing, FINRA has proposed replacing the $25,000 threshold with a margin-based approach. Rules change; check your broker's current page before you plan around any number here.
A few practical consequences:
| Account | Day trades allowed | Notes |
|---|---|---|
| Margin, under $25k | 3 per rolling 5 days | The fourth flags you; a 90-day restriction follows if you do not top up |
| Margin, $25k or more | Unlimited | Intraday buying power is usually 4× equity |
| Cash, any size | Limited by settled cash | No leverage, no shorting |
Three day trades a week is not enough to learn from. If you want to day trade US stocks you need the $25,000, plus a buffer, because equity below the line at any close locks you out.
Futures, forex and crypto: no PDT, different danger
Futures have no pattern day trader rule. Brokers set intraday margins per contract, and they are small. A micro E-mini S&P (MES) might need $50 to $100 of intraday margin at a discount futures broker; the full E-mini (ES) around $500 to $1,500. These numbers vary by broker and rise in volatile periods.
Small margin is not small risk. One ES point is $50. A 10-point stop is $500 regardless of the margin you posted. What the low margin buys you is access, not safety.
Forex and crypto perpetuals are similar: leverage of 30:1 (retail forex in the US is capped at 50:1 for majors) up to 100:1 in offshore crypto, no trade-count rules, and the same arithmetic. The stop distance times the position size is your risk. The margin number is irrelevant to it.
How much capital the maths needs
Go back to the risk framework. A sensible intraday plan risks around 0.25% to 0.5% of the account per trade and caps the day at about 1% to 1.5%. Work backwards from the smallest position you can trade.
Stocks. A $30 stock with a $0.30 stop: risking $50 means 166 shares, which is fine. Risking $50 with the $25,000 minimum is 0.2% per trade. The PDT floor is, coincidentally, about the right size to run the plan.
Micro futures. MES tick is $1.25, one point is $5. An 8-point stop on one micro is $40. To keep that at 0.5% you need an $8,000 account. Below about $5,000 you cannot trade even one micro at a sane percentage.
Full-size futures. The same 8-point stop on one ES is $400. At 0.5% per trade that needs $80,000. This is why "I opened a $3,000 futures account and trade ES" is a plan to lose $3,000.
Forex. A micro lot (1,000 units) of EUR/USD moves about $0.10 per pip. A 10-pip stop is $1. Almost any account can size correctly; the constraint is spread cost, covered next lesson.
| Product | Minimum sensible unit | Typical stop | Risk per unit | Account for 0.5% risk |
|---|---|---|---|---|
| US stock, $30 | 1 share | $0.30 | $0.30 | any, but PDT needs $25k |
| MES | 1 contract | 8 points | $40 | $8,000 |
| ES | 1 contract | 8 points | $400 | $80,000 |
| MNQ | 1 contract | 30 points | $60 | $12,000 |
| EUR/USD micro | 1,000 units | 10 pips | $1 | $200 |
Key idea: The capital requirement is not the broker's margin or the regulator's minimum. It is the account size at which your smallest tradable unit, times your normal stop, is a fraction of a percent.
Capital you can afford to lose
The Brazil study's 97% did not lose theoretical money. Whatever you put in a day trading account should be money whose loss changes nothing about your rent, your family or your job. If the account is also your emergency fund, you will trade it like an emergency, which is exactly how people blow up.
Try it: Pick the product you intend to trade. Write its smallest unit, your typical stop in points or cents, and the dollar risk of one unit. Divide by 0.005. That is the minimum account. Compare it to what you actually have.
Recap
- US margin accounts under $25,000 are limited to three day trades per five business days; the rule may change, so check your broker.
- Futures, forex and crypto have no trade-count rule, but low margin does not reduce the dollar risk of a stop.
- Size the account from the smallest unit times the stop divided by your per-trade risk percentage, not from the margin requirement.
- One ES contract with a normal stop needs a far larger account than most beginners have; micros exist for this reason.
- Only trade money whose loss would not change your life.
See it drawn
Original diagrams for the ideas on this page. Illustrative, not real market data.