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Coughing up the $25k requirement for Pattern Day Trading
- Thread starter AeroKen83
- Start date
Quote from zdreg:
the pdt rule was put in place as a result of consultation with the brokerage industry. most firms are happy to have these rules in place because they eliminate alot of nuisance know your customer lawsuits.
yes, that makes sense.
however, it should be up to the broker and not mandated.
best,
surfer
The PDT rule was put in by the SEC, not NASDAQ or NYSE. It was enacted because too many people got the idea that day trading was an easy way to make a lot of money.
Through their own ignorance and often encouraged by unscroupulous shops many of these people traded money they couldn't afford to lose or even didn't have. It was common for people to use credit cards, home equity loans, and retirement savings. There were even extreme cases of violence (remember Atlanta?) by people who lost everything.
Who supports those who lose everything? The government (ie taxpayers) through social welfare programs. Therefore, it is not unreasonable for the government to try to prevent ignorant people from self destructing. Maybe $25k isn't the right number, but that's another story.
Anyone with less than $25k risk capital should be investing not trading.
Through their own ignorance and often encouraged by unscroupulous shops many of these people traded money they couldn't afford to lose or even didn't have. It was common for people to use credit cards, home equity loans, and retirement savings. There were even extreme cases of violence (remember Atlanta?) by people who lost everything.
Who supports those who lose everything? The government (ie taxpayers) through social welfare programs. Therefore, it is not unreasonable for the government to try to prevent ignorant people from self destructing. Maybe $25k isn't the right number, but that's another story.
Anyone with less than $25k risk capital should be investing not trading.
Quote from Ebo:
I agree!
It should not be mandated by a regulatory agency, but by the firm themselves.
it was mandated by the firms themselves through their messenger boy -sec.
as previously mentioned it was good for the industry to get rid of some nuisance lawsuits resulting from know your customer rules.
In my case it was a good thing.
I started with much less than the required 25K.
As I was only allowed to make 3 day-trades every 5 days I started swing trading. In cases where I was forced to make 3 trades in the allotted period (not always getting stopped out, ,sometime I hit my target in a day) I took 5 days off and started again.
You learn patience: You learn to pick only high probability set-ups. You learn that there are always opportunities in the market and that missing a week doesnât really make a lot of difference.
Fwiw:I found EOD set-ups quite lucrative. A stock moving up at the end of the day on above average volume more often than not will open higher the next day. Be prepared to sell at or shortly after the market opens.
It took a couple years to get over 25K but I feel the learning experience was worth it.
I started with much less than the required 25K.
As I was only allowed to make 3 day-trades every 5 days I started swing trading. In cases where I was forced to make 3 trades in the allotted period (not always getting stopped out, ,sometime I hit my target in a day) I took 5 days off and started again.
You learn patience: You learn to pick only high probability set-ups. You learn that there are always opportunities in the market and that missing a week doesnât really make a lot of difference.
Fwiw:I found EOD set-ups quite lucrative. A stock moving up at the end of the day on above average volume more often than not will open higher the next day. Be prepared to sell at or shortly after the market opens.
It took a couple years to get over 25K but I feel the learning experience was worth it.
Quote from maxpi:
The brokers could offer a margin account but not allow you to borrow unless you had $25,000 if they wanted to. You could still trade with the 3 day clearing with a few hundred bucks but not on margin. No risk to them unless you were a real "pro" as evidenced by your ability to raise the 25 large.
I meant without the 3 day clearing in effect.. a'la the IB IRA's. Anyhow....
OK guys...please reply only by PM. I can bring on a few non licensed traders with less than $25K and allow them to use $100K or more...trade remote, fair pricing.
We are only bringing on 25 people at this time.
All the safety, liquidity pools, and security of Bright.
Canadians welcome, all provinces.
Send PM with phone number and we can chat.
Don
We are only bringing on 25 people at this time.
All the safety, liquidity pools, and security of Bright.
Canadians welcome, all provinces.
Send PM with phone number and we can chat.
Don
Quote from Don Bright:
OK guys...please reply only by PM. I can bring on a few non licensed traders with less than $25K and allow them to use $100K or more...trade remote, fair pricing.
We are only bringing on 25 people at this time.
All the safety, liquidity pools, and security of Bright.
Canadians welcome, all provinces.
Send PM with phone number and we can chat.
Don
Funny, when i asked don bright himself a few months ago, he told more more along the lines of "don't get in this game" and take a hike.
Why the change now? Does the firm now gain more money off of losers as well? I find this kinda strange, care to explain Don Bright?
I got the impression that the rationale for the PDT rule was that BDs were taking on risk by extending margin credit intraday but they were getting very little in return (i.e. interest on margin loans) because the small day traders were in general flat at the end of each day. Above a certain account size threshold, traders would become more comfortable holding overnight.
What I never understood is why long options were included in the PDT rule. They're not marginable, so the BD is not extending any credit and not taking on any risk (although there's an indirect risk in cases where options are autoexercised in an account that can't afford to buy the underlying). I once got locked out of an account for opening some very small option positions (no more than $75 each) on the day before expiration, which expired worthless. The broker treated expiration of worthless options as a trade that occurred on Friday. And they didn't use the 6% rule, either; my daytrades for the 5-day period were under 3% of the total number of trades. I was told, curtly, "that's the way our software works."
What I never understood is why long options were included in the PDT rule. They're not marginable, so the BD is not extending any credit and not taking on any risk (although there's an indirect risk in cases where options are autoexercised in an account that can't afford to buy the underlying). I once got locked out of an account for opening some very small option positions (no more than $75 each) on the day before expiration, which expired worthless. The broker treated expiration of worthless options as a trade that occurred on Friday. And they didn't use the 6% rule, either; my daytrades for the 5-day period were under 3% of the total number of trades. I was told, curtly, "that's the way our software works."