FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six per cent of the customer’s total trades in the account for that same five business day period.
What is 'good faith violation' and how does it affect me?
A good faith violation occurs when you buy a security and sell it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid for securities qualify as "settled funds."
Liquidating a position before it was ever paid for with settled funds is considered a "good faith violation" because no good faith effort was made to deposit additional cash into the account prior to the settlement date.
If you incur 3 good faith violations in a 12-month period, we will restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade. This restriction will be effective for 90 calendar days.