What is the 3 day trade limit?

The 3 day trade limit is a unique restriction that FINRA implemented in 2001. It is a safety feature that helps brokers lower the risks linked to day trading. Once you have a PDT account, you’re required to have an equity of at least $25,000.

For more on the 3 day trade limit, please read on.

How does the 3 day trade limit work?

The 3 day trade limit stipulates that if you have $5,000, you can make 3 day trades in 5 days. And if you ignore this rule and make a 4th trade, then the broker will freeze your accounts for about 90 days. Or you can increase your equity to over $25,000.

But if your equity exceeds $25,000, then the 3 day trades a week limit doesn’t apply to you.

Can you make profitable trades within only 3 day trades per week?

Yes, any trader can make a profit even from a single trade. So provided you have a reliable strategy and are willing to be patient, you can still make profitable trades even with the 3-day trades rule. The 3 day trades in 5 days rule gives you more purchasing power of 4:1.

Mastering the 3 Day Trades a Week Rule for Long Term Strategy

With a high purchasing power and an account of $25,000, you’ll have a purchasing power of about $100,000. Unfortunately, you can only use this cash for day trading and never hold a position overnight. Another thing to consider is always closing the previous day with a balance of over $25,000.

How to maximize your profits with the 3 day trades?

Since you’ll be working with 3 trades in 5 days; stay away from penny stocks. Instead, invest in other top stocks that trade in huge volumes. For better results, focus on 1 or 2 of the most volatile stocks at any given time.

Why the 3 day trade limit is good for traders?

The 3 day trading rule is there to protect traders working with equity of about $25,000. Basically, it’s there to prevent you from burning out your account while trading. And that’s because you’ll be limited to 3 trades in 5 days instead of the 4 to 5 trades other day traders make in a day.


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