Does pattern day trading apply to crypto?

In this article, you learn about day trading. When it’s considered pattern day trading. What are the rules for such activity? How do these rules apply to crypto trading markets?

What is day trading?

If you are interested in investing you must hear the expression day trading. In the past, this investing strategy was only available to people how worked for large financial institutions, trading houses. With the rise of internet-based trading platforms and programs, it is now available for the average investor. Daytrading might seem promising and can be very lucrative. For a novice investor might seem overwhelming because, without a well-defined strategy, it is quite dangerous.

Day trading means buying and selling a security on the same day. This strategy occurs on any market but most commonly on the foreign exchange and stock markets. That doesn’t mean you can’t day trade with cryptos. A successful day trader is well educated on the market where he/she is investing and also well-founded. They use short-term trading strategies to capitalize on the price movements on that day.

They are constantly listening to events that cause short-term market moves. Trading based on market news is a popular technique. These can include economic statistics, corporate earnings, interest rates, if you look at cryptocurrencies you can look for announcements for where it becomes a viable payment, what top market analysts say, the popularity of that given crypto, etc.

Other popular investing strategies used by day traders are:

Scalping: with this strategy, the goal is to make numerous small profits on the small price movements

Range trading: this strategy buying and selling decisions based on support and resistance levels

News-based trading: with this strategy a day trader identify trading opportunities based on high volatility news events

High-frequency trading: these strategies include using algorithms to exploit small or short term market inefficiencies

Day trading summerised

So it sounds a little bit complicated at first but what are the profit potentials of day trading? The profit potential of day trading is debated and sometimes misunderstood in the investing community. One of the reasons for this is various day trading scams o the internet promising beginners with huge returns in small amounts of time made it a little bit like a ‘get-rich quick’ scheme. These scams lead people to day trade without the proper knowledge which can lead to a disaster. The ones who know what they are doing can make a successful living but don’t forget the fact that it is a risky way of investing.

For that reason, many professional money managers and financial advisors don’t use day trading because they think the risk outweighs the reward. On the other hand, there are successful day traders proves there are profits to be made, but economist and financial practitioners say that active investing strategies tend to underperform the more traditional passive index strategies(buy and hold) especially after fees and taxes.

To sum it up day trading is a complicated strategy and it’s not for everyone. It requires an in-depth understanding of the crypto market and needs various strategies to be profitable. There are success stories of those who made a fortune in a short period of time but remember that the majority of day traders did not become millionaires overnight if they ever become one. Just like with anything else, don’t overestimate the effect of luck and timing, these things can break even the most skilled day traders.

What is pattern day trading?

So we covered the basics of day trading lets talk about pattern day traders. By definition, a pattern day trader(PTD) is an investor who executes four or more day trades in a span of five business days on a margin account. These trades constitute more than 6% of the margin account’s liquidity.

The problem with such activity is many brokerage firms flags these pattern day traders and even restrictions can occur this is because these firms want to discourage investors to trade excessively.

Let’s see an example of pattern day trading. Let’s imagine our day trader who has 30,000$ in his margin account. He can purchase up to 120,000$ worth of securities which is double compared to a standard margin account. If his securities gain 1% over the day he could make around 1200$ profits. As you can see the potential for large profits can encourage the investors to do pattern day trading, but needless to say that high potential for profits comes hand in hand with high risk and even greater potential to lose money.

Crypto markets and rules about pattern day trading

BINANCE – Binance is currently the biggest crypto exchange on the internet. They have many options to trade from BNB(Binance coin) where you can trade with cryptos against BNB, Bitcoin markets where you can trade with the price changes against other cryptos, ALTs market where you can trade with altcoins, and my personal favourite FIAT market where you can trade crypto/USDT. There is a lot of options for day trading and Binance will not flag your account for pattern day trading, but there is a rule for Minimum Trade Amount.

OKEX – OKEX is also a very large crypto trading platform with more than 20 million traders in over 200 countries. OKEX website provides a very good platform for trading with instruments and order types such as limit order, make an order, stop order, or iceberg order. It has the most popular and not-so-popular crypto pairs as well as crypto-fiat pairs. Just like with Binance they won’t flag your account for pattern day trading.

Upbit – Upbit is a South Korean crypto exchange with 154 supported coins and 467 trading pairs. They have a very trader-friendly interface with built-in tools such as indicators, charts order types. As with other crypto exchanges so far they neither flag your account for pattern day trading.

Huobi – Houbi Global is also a very popular crypto exchange and trading platform. It serves tens and millions of users worldwide has an interface for trading with all the necessary tools you need to make wise investments. They also not going to flag your account for pattern day trading.

Coinbase – Coinbase and Coinbase Exchange is also one of the most popular exchanges in the world. It’s a US-based company with fund insurances. You can buy and sell crypto for FIAT currencies and on the exchange, you can use their charts and tools for trading with crypto pairs. They also do not flag pattern day traders.

As you can see these large crypto exchanges doesn’t flag users for pattern day trading. It’s because the pattern day trading rule only applies to exchanges and financial institution that is regulated by the FINRA. But that doesn’t mean you shouldn’t be continuous and never invest more than you can afford to lose.


Day trading is using short-term investment strategies to capitalize on the little price movements of that given day. Strategies can be varied and this activity involves a lot of research and knowledge to be profitable. Someone who is made four or more day trades within five business days can be flagged as a pattern day trader. This rule is made by FINRA, so on most crypto exchanges, your account wouldn’t be flagged because it is not regulated by FINRA.

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