Another newby

Opteronion

Opteronion

Hi,

I have been lightly trading stocks since March and have been increasing my trading frequency gradually mostly swing trading but have started to make a few day trades and I think I want to do it regularly. I have been watching and studying 7 days a week and tracking tons of stocks.

I have been using E-trade Pro. They require 30 trades a month to keep using the platform.

However, to trade this frequently (which I plan on doing) does this not classify me as a day trader to the SEC? And thus require me to have 25K in equity?

I only have ~12K in equity and recently opened a Margin account. Which I think I can be successful with. (I started w/ 8K in March)

How does the SEC become involved? Do they monitor accounts?

I am in a catch 22; To keep my trading platform and 9.99 trades I need to make 30 trades a month. (which I want to do) And E trade does not tell me to do that I need 25K.
But the SEC requires 25K? It's like giving beer to a teenager but telling him he can't drink it?

How does the SEC enforce this? What triggers my designation as a day trader?

What should I do? get more $$ in my account?

Thanks for any advice.

Opty
 
From IB website:

Day Trade: any trade pair wherein a position in a security (stock, single-stock future (SSF), bond or stock option) is increased ("opened") and thereafter decreased ("closed") within the same trading session.


Pattern Day Trader: someone who effects 4 or more Day Trades within a 5 business day period. A trader who executes more than 4 day trades in this time is deemed to be exhibiting a ‘pattern’ of day trading and is thereafter subject to the PDT restrictions.


In order to day trade, the account must have at least 25,000 USD in Net Liquidation Value, where Net Liquidation Value includes cash, stocks, options, and futures P+L.


The NYSE regulations state that if an account with less than 25,000 USD is flagged as a day trading account, the account must be frozen to prevent additional trades for a period of 90 days. IB has created algorithms to prevent small accounts from being flagged as day trading accounts, to avoid triggering the 90 day freeze. IB implements this by prohibiting the 4th opening transaction within 5 days if the account has less than 25,000 USD in equity.


*************************

Before you get your account frozen, it would be a good idea to talk to ETrade customer service and see what their policy is.
 
Thank you very much!

I had some of my funds frozen for 90 days because I used unsettled funds to buy more stock.

I called Etrade and they said a margin account would solve that problem so i could keep trading, The did not tell me that I needed 25K to trade as often as I wanted to.

I will call them again and see what happens.

It sounds like I need to put more $$ in my account.

Wold I be much better off using IB for the small amount of trading I want to do rather than e-trade Pro?

Thanks again for the reply.
 
It all depends on how many of those trades where "day-trades". You could easily do 30+ swing trades a month and not have any issues with the PDT rule.
 
Now that I think about it, that really is irresponsible of ETrade not to warn you that you need to have $25k if you are a pattern day trader. However, it would appear that you can satisfy the 30 trade requirement without triggering the PDT designation if you are careful. Notice that the definition of a "day trade" is a trade "pair", ie a buy and a sell. ETrade would call that two trades. Each ticket is a separate trade. So you can do a maximum of four round turn trades every five days. That should be enough to get to 30 tickets.
 
I think you would be a lot better off with IB. I saw that ETrade Pro charges you $.005 per share to use an ECN. IB will give you a credit for adding liquidity and only charge an ECN fee if you take liquidity. ETradePro has charting though, doesn't it? IB's charting sucks.
 
Quote from AAAintheBeltway:

Now that I think about it, that really is irresponsible of ETrade not to warn you that you need to have $25k if you are a pattern day trader. However, it would appear that you can satisfy the 30 trade requirement without triggering the PDT designation if you are careful. Notice that the definition of a "day trade" is a trade "pair", ie a buy and a sell. ETrade would call that two trades. Each ticket is a separate trade. So you can do a maximum of four round turn trades every five days. That should be enough to get to 30 tickets.
More...

No doubt about etrade not telling me. It is a fine line to meet my 30 trades to keep my ETPro platform and lower comm.fees and not being classified as a PDT.

E trade turned off my platform Saturday because I did not have 30 trades last month. They did not even warn me. I spent hours upon hours setting up the platform and could not use it yesterday or today. They said they would turn it back on. Hopefully it will be on tomorrow?

All these hurdles! I thought taking some big losses and getting thru it was bad! not even.

I am determined to make it work.

thanks for the info etc.
 
30 trades @ $9.99....why would you want to keep that platform?
$300/month... open an account at IB... you may be able to avoid the 25K by position / swing trading. Probably will need the 25K if you are more active... quotetracker, good charting program and free...
 
Quote from AAAintheBeltway:

I think you would be a lot better off with IB. I saw that ETrade Pro charges you $.005 per share to use an ECN. IB will give you a credit for adding liquidity and only charge an ECN fee if you take liquidity. ETradePro has charting though, doesn't it? IB's charting sucks.
More...

Yeah, ET PRo has charting and I kinda like it (but I know nothing)

You can only run 1 monitor. And be logged into only 1 PC. the platform has "four screens" so on 1 screen I have my watch lists , position list , news ticker and most active list. On the other three pages I have them split up with 6 yo 9 charts . For every chart I have a market depth (levelII) window.

Again I no nothing else to compare, but
it seems to work well.

The only time I use the ECN is for AH. Otherwise I use the "Auto" button? It seems to execute well.
They also give a few other choices like "Arca" and I cant remember cuz I am locked out right now, (bastards)


Thanks
 
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