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The $25,000 Day Trading Rule Ends June 4
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The $25,000 Day Trading Rule Ends June 4
A change is coming to pattern day trading rules that will make it easier for small retail investors to get in the game. Here's what to know.
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9 years of experience Expertise Stocks ETFs economic newsSam Taube writes about investing for NerdWallet. He has covered investing and financial news since earning his economics degree from the University of Maryland in 2016. Sam has previously written for Investopedia, Benzinga, Seeking Alpha, Wealth Daily and Investment U, and has worked as an editor for Investment U, Wealth Daily and Haven Investment Letter. He is based in Brooklyn, New York.
Sam Taube writes about investing for NerdWallet. He has covered investing and financial news since earning his economics degree from the University of Maryland in 2016. Sam has previously written for Investopedia, Benzinga, Seeking Alpha, Wealth Daily and Investment U, and has worked as an editor for Investment U, Wealth Daily and Haven Investment Letter. He is based in Brooklyn, New York. Published in Lead Writer + more + more
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19 years of experience Expertise Retirement planning investment management investment accountsArielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia.
Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia. Published in Head of Content, Investing & Taxes + more + moreIf you’re a day trader, you're likely well aware of the pattern day trader (PDT) rule, which imposes minimum balance requirements (historically $25,000) on traders who make a lot of transactions in a margin account.
If you’re a day trader, you're likely well aware of the pattern day trader (PDT) rule, which imposes minimum balance requirements (historically $25,000) on traders who make a lot of transactions in a margin account.The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) are about to relax some of those requirements. On June 4, a change to margin rules is coming into effect that does away with minimum balance requirements for day traders.
The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) are about to relax some of those requirements. On June 4, a On June 4, a change to margin rules is coming into effect that does away with minimum balance requirements for day traders change to margin rules is coming into effect that does away with minimum balance requirements for day traders . .Below, an overview of the rule as it exists today, how you can avoid it, and what to expect from the changes coming up in the next few weeks.
Below, an overview of the rule as it exists today, how you can avoid it, and what to expect from the changes coming up in the next few weeks.What is the pattern day trader rule?
What is the pattern day trader rule?FINRA currently defines a pattern day trader as someone who, in a margin account, “executes four or more ‘day trades’ within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades for that same five business day period
FINRA currently defines a pattern day trader as someone who, in a margin account , “executes four or more ‘day trades’ within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades for that same five business day period Investor.gov. Pattern Day Trader. Accessed Oct 2, 2025. .”This effectively means that some investors who place a lot of long-term trades but do a little bit of day trading may be exempt, but the opposite may also be true — if you’re placing only a handful of trades each week but the majority are day trades, you may be considered a pattern day trader.
This effectively means that some investors who place a lot of long-term trades but do a little bit of day trading may be exempt, but the opposite may also be true — if you’re placing only a handful of trades each week but the majority are day trades, you may be considered a pattern day trader.(This is the minimum, industry-wide criteria for identifying a pattern day trader. Individual brokers may have broader criteria that define more users as pattern day traders; it’s worth reading the fine print for your brokerage account to see how they define the term.)
(This is the minimum, industry-wide criteria for identifying a pattern day trader. Individual brokers may have broader criteria that define more users as pattern day traders; it’s worth reading the fine print for your brokerage account to see how they define the term.)» MORE: Best platforms for day trading
» MORE: » MORE: Best platforms for day tradingUnder the old FINRA rules (which are still in effect for the next few weeks), pattern day traders must maintain a minimum account balance of $25,000.
Under the old FINRA rules (which are still in effect for the next few weeks), pattern day traders must maintain a minimum account balance of $25,000.This gate keeps a lot of beginner, small-balance investors out of day trading, by design, to protect them from the substantial risks associated with it. The minimum was implemented in 2001, in the aftermath of the dot-com crash, when many retail traders suffered significant losses trading overvalued tech stocks.
This gate keeps a lot of beginner, small-balance investors out of day trading, by design, to protect them from the substantial risks associated with it. The minimum was implemented in 2001, in the aftermath of the dot-com crash, when many retail traders suffered significant losses trading overvalued tech stocks.Brokerage firms
Brokerage firms
Brokerage firmson Charles Schwab's website
on E*TRADE's website
on Vanguard's website
on Fidelity's website
How and when the pattern day trader rule is changing
How and when the pattern day trader rule is changingIn late 2025, the FINRA Board of Governors approved amendments that would scrap the $25,000 minimum, and replace it with a more flexible intraday maintenance margin requirement. The SEC approved the change on April 14, and FINRA published a notice a few days later stating that the new rule will go into effect on June 4
In late 2025, the FINRA Board of Governors approved amendments that would scrap the $25,000 minimum, and replace it with a more flexible intraday maintenance margin requirement. The SEC approved the change on April 14, and FINRA published a notice a few days later stating that the new rule will go into effect on June 4 FINRA. FINRA Adopts New Intraday Margin Standards to Replace the Day Trading Margin Requirements. Accessed Apr 22, 2026. .Rather than needing to keep $25,000 in their accounts, day traders with margin accounts would just need to keep enough money in their account to avoid margin calls on their positions. This typically means maintaining a balance of at least 25% of the total value of their outstanding positions, although brokers are allowed to impose higher requirements of their own
Rather than needing to keep $25,000 in their accounts, day traders with margin accounts would just need to keep enough money in their account to avoid margin calls on their positions. This typically means maintaining a balance of at least 25% of the total value of their outstanding positions, although brokers are allowed to impose higher requirements of their own FINRA. Understanding the New Intraday Margin Requirements. Accessed Apr 22, 2026. .However, traders would still be subject to FINRA regulations that require a $2,000 minimum account balance to make leveraged trades — that is, trades using borrowed money, and not available cash in their accounts — so investors with smaller balances will still be gate kept from day trading using borrowed money
However, traders would still be subject to FINRA regulations that require a $2,000 minimum account balance to make leveraged trades — that is, trades using borrowed money, and not available cash in their accounts — so investors with smaller balances will still be gate kept from day trading using borrowed money Securities and Exchange Commission. Release No. 34-105226; File No. SR-FINRA-2025-017. Accessed Apr 22, 2026. .Under the new standards, margin traders who make leveraged trades would be subject to a minimum of either $2,000 or enough to avoid a margin call, whichever one is greater. But there will be no minimum balance requirement for margin account users who don't use leverage — that is, those who don't make purchases using more than the available cash balance in their accounts.
Under the new standards, margin traders who make leveraged trades who make leveraged trades would be subject to a minimum of either $2,000 or enough to avoid a margin call, whichever one is greater. But there will be no minimum balance requirement for margin account users who don't don't use leverage — that is, those who don't make purchases using more than the available cash balance in their accounts.When the rule change goes into effect, a lot more investors will be eligible to day trade stocks on margin, for better or worse.
When the rule change goes into effect, a lot more investors will be eligible to day trade stocks on margin , for better or worse.How to avoid the pattern day trader rule
How to avoid the pattern day trader ruleThe $25,000 minimum for pattern day traders still stands at the time of last update, for a few more weeks. And even after the change goes into effect in June, there will still be a $2,000 minimum for making leveraged trades, which could still present a hurdle for some small-balance investors. But there are several ways to avoid the rule.
The $25,000 minimum for pattern day traders still stands at the time of last update, for a few more weeks. And even after the change goes into effect in June, there will still be a $2,000 minimum for making leveraged trades, which could still present a hurdle for some small-balance investors. But there are several ways to avoid the rule.The simplest, and perhaps most obvious, is to avoid day trading entirely and stick to long-term investing. Recent studies suggest that day trading is not a winning proposition for most investors, especially retail investors who use brokerage apps.
The simplest, and perhaps most obvious, is to avoid day trading entirely and stick to long-term investing. Recent studies suggest that day trading is not a winning proposition for most investors, especially retail investors who use brokerage apps .For example, a 2021 study published in the Journal of Finance looked at the top stocks purchased by Robinhood users each day from May 2018 to August 2020
For example, a 2021 study published in the Journal of Finance Journal of Finance looked at the top stocks purchased by Robinhood users each day from May 2018 to August 2020 Journal of Finance. Attention‐Induced Trading and Returns: Evidence from Robinhood Users. Accessed Oct 2, 2025. . It found that the average 20-day return on these stocks was -4.7%, implying that many if not most short-term traders on Robinhood end up losing money.By contrast, historical data shows that long-term investments in index funds have much more reliable returns — the S&P 500 index, for example, has a long-term average annual return of about 10% per year.
By contrast, historical data shows that long-term investments in index funds have much more reliable returns — the S&P 500 index, for example, has a long-term average annual return of about 10% per year.Day trading without leverage: A workaround under the new standards
Day trading without leverage: A workaround under the new standardsAfter June 4, the only minimum balance requirement for day trading will be a $2,000 minimum on investors who use leverage — so after that date, one workaround is simply to avoid using leverage (i.e., only make purchases that are smaller than your available cash balance), in which case there will be no minimum balance requirement. Using leverage is risky in general, so this workaround may be especially suitable for investors who want to try day trading but also want to play it safe.
After June 4, the only minimum balance requirement for day trading will be a $2,000 minimum on investors who use leverage — so after that date, one workaround is simply to avoid using leverage (i.e., only make purchases that are smaller than your available cash balance), in which case there will be no minimum balance requirement. Using leverage is risky in general, so this workaround may be especially suitable for investors who want to try day trading but also want to play it safe.Also, if you really want to try your hand at day trading right now, without worrying about the PDT rule or waiting until June 4, there’s another workaround: The rule only applies to margin accounts. Cash brokerage accounts, which do not allow users to invest borrowed money at all, are exempt. Some brokers, such as Robinhood, give all users a margin account by default, meaning that users who want a cash brokerage account must go into the settings menu and actively switch to a cash brokerage account.
Also, if you really want to try your hand at day trading right now right now , without worrying about the PDT rule or or waiting until June 4, there’s another workaround: The rule only applies to margin accounts. Cash brokerage accounts, which do not allow users to invest borrowed money at all, are exempt. Some brokers, such as Robinhood, give all users a margin account by default, meaning that users who want a cash brokerage account must go into the settings menu and actively switch to a cash brokerage account.Downsides of cash brokerage accounts
Downsides of cash brokerage accountsIt’s important to note that switching to a cash brokerage account has some disadvantages. Certain types of advanced trades, such as short sales, require margin and are not possible in cash brokerage accounts.
It’s important to note that switching to a cash brokerage account has some disadvantages. Certain types of advanced trades, such as short sales , require margin and are not possible in cash brokerage accounts.For some investors, these restrictions may defeat the purpose of day trading. But if you want to try out frequently buying and selling stocks on a small scale, without coughing up $25,000 to meet the minimum balance for margin trading (or waiting until June 4), using a cash brokerage account is an option.
For some investors, these restrictions may defeat the purpose of day trading. But if you want to try out frequently buying and selling stocks on a small scale, without coughing up $25,000 to meet the minimum balance for margin trading (or waiting until June 4), using a cash brokerage account is an option.A previous version of this article incorrectly stated that the new minimum margin requirement for leveraged trades is an overall minimum balance requirement for margin accounts. This article has been corrected.
A previous version of this article incorrectly stated that the new minimum margin requirement for leveraged trades is an overall minimum balance requirement for margin accounts. This article has been corrected. A previous version of this article incorrectly stated that the new minimum margin requirement for leveraged trades is an overall minimum balance requirement for margin accounts. This article has been corrected.Helpful resources
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