• Intraday trading is common on the stock market.stock market analysis screenshot image by .shock from Fotolia.com
  
  Day trading is a particular type of trading where positions are opened and closed on the same day. To make a meaningful profit from the small fluctuations that may transpire over minutes or hours, a day trader must purchase large quantities of shares for each trade. To make this possible, there are rules associated with the field that help to protect brokers while enabling day traders to make a living more easily.
  
  

Minimum Balance

• The Financial Industry Regulatory Authority is responsible for regulating day trading. The rules that FINRA lays out benefit both brokers and traders while also protecting the stock market from novice gamblers who wish to take chances with little capital. The most significant rule for day trading equity products such as stocks and options requires that a minimum balance of $25,000 be held at all times in the brokerage account. This may be a combination of cash and stock. Anyone who engages in day trading without meeting this balance requirement will have their brokerage account suspended until the funds are deposited. This rule aims to ensure that only experienced and well-capitalized individuals put money at risk in the stock market. Without this rule, anyone could day trade on small accounts, and the stock market could be seriously influenced by price fluctuations from a novice public seeking quick thrills similar to that of a casino.
  
  

Pattern Day Trading

• The minimum balance requirements and other rules associated with day trading are only in effect if the trader is determined to be "pattern day trading." This rule states that when more than three day trades are executed within a five-day period, the trader is a pattern day trader and must meet the minimum balance requirement. In turn, when a broker identifies an account as a pattern day trader, it must change the account type automatically and immediately provide day trading leverage to the trader should the minimum balance be met.
  
  

Leverage

• FINRA requires that brokers provide "4x" leverage to their pattern day trading clients. This allows a trader to access four times the number of shares as their actual account size would normally allow. Thus a trader with a $50,000 brokerage account could buy up to $200,000 worth of stock on a single trade. This rule benefits day traders who usually require high leverage to profit from small fluctuations in prices.
  
  

Closing Positions

• All stocks purchased with the day trading leverage must be sold on the same day they are purchased. A trader may not decide to hold the stock overnight for potentially greater profits the following day. The U.S. stock market closes at 4 p.m. New York time. Day trading positions must be closed by this time or a brokerage account may be suspended.