How Much Capital Is Needed to Become a Day Trader?

To be a pattern day trader, an investor must have a margin account with a brokerage firm and maintain a balance of at least $25,000 at all times.

General Capital Requirements

If an investor wants to day trade, there is not an official capital requirement. A day trade is buying and selling the same security in the same trading day. Investors can technically complete a day trade with any amount of shares, so there would be no capital requirement.

Pattern Day Trader

If an investor completes four day trades over five consecutive trading days, he will be labeled a pattern day trader and become subject to rules set by the Securities and Exchange Commission. Capital requirements are set for pattern day traders. An investor must maintain an account balance of $25,000 in the day-trading account. If a pattern day trader does not have the minimum balance, the trading account will be restricted for three months.

Margin Account

Pattern day traders must also maintain a margin account with the brokerage firm that holds the day-trading account. Brokerages have individual requirements for a margin account. Most brokerages require a minimum balance to trade with a margin account. If an investor is casually day trading and not considered a pattern day trader, a margin account is not required.

References

• "Day Trading: Your Dollars at Risk"; Securities and Exchange Commission
• "Day Trading"; Securities and Exchange Commission
• "Day Trading Margin Requirements"; FINRA.org

Resources

• New York Stock Exchange
• NASDAQ