Effective Trading Strategy for < $25K Accounts

[Magna]

TickRader,

Accounts with less than $25,000 will be restricted to trading only on a cash-available basis. This means if you have $20,000 you can daytrade all day with $20,000.

If that last statement is true, and I've never seen that verified by any broker, it would probably mean that, due to settlement, you would have one use per day of $20,000. So if you went long 400 sh of a $50 stock, regardless of whether you were profitable or not on that trade, you would be done for that day as you've "used up" your $20K. After settlement, whether it's T+1 or T+3, you would then have cash available to use again. Once, until the next settlement.

 

[Chartwiz212]

I dont get the point....why go back & forth on 20-25k.....just trade 1 emini Nasdaq - SP & solve the problem !.......Simple, if your underfunded dont put pressure on yourself to trade stocks, you should not trade under pressure at all.........Chris

 

[AAAintheBeltway]

GATrader,

With your background you probably should be giving me advice, not the other way around. Anyway, for me options are more of a sideline than my main activity, which is futures and equities. My approach is definitely based on the underlying stock, not so much on the option's IV, although I will look at it. I don't bother with theoretical values. My main play is a credit spread off an overbought or oversold situation or a backspread off a retracement level.

 

[ez_go_win]

Originally posted by Magna
TickRader,
If that last statement is true, and I've never seen that verified by any broker, it would probably mean that, due to settlement, you would have one use per day of $20,000. So if you went long 400 sh of a $50 stock, regardless of whether you were profitable or not on that trade, you would be done for that day as you've "used up" your $20K. After settlement, whether it's T+1 or T+3, you would then have cash available to use again. Once, until the next settlement.

FWIW, I used to trade with Datek until very recently, and happened to have the unfortunate event of going below $25k. I wanted to see what happens, so I didn't send any money. I was still able to trade as actively as always, except that I couldn't use margin. Cash buying power was updated IN REAL TIME after I closed positions (like "T+0"). Not sure if this is was a glitch. But as soon as I traded the account back over $25k, I was back to 4:1 margins.

Given the fact that I started out as a margin account with PDT status before going below $25k, maybe that had something to do with the fact that I was still able to trade actively even after going below $25k.

Here's what may be happening. If the broker is a member of NASD (as is Datek), then their interpretations of the SEC laws are more lenient than the brokers who are members of NYSE. From what I understand, NYSE and NASD don't quite agree on how the SEC rules should be implemented.

I have a friend who works at ETrade (member of NYSE), and he believes that if you go below $25k with them and you're a pattern day trader, you're out of luck in trading stocks (other than closing out positions) until your balance is back over $25k.

So here's a summary of what I believe is the case (anyone, please correct me if I'm wrong!!):

* Broker is member of NYSE = no day trading under $25k, and if you're a PDT, you're totally out of luck.
* Broker is member of NASD = daytrading under $25k OK with margin statused account, but not allowed use of margin.

 

[Turok]

>I dont get the point....why go back & forth on
>20-25k.....just trade 1 emini Nasdaq - SP &
>solve the problem

OK whiz, here's the point -- there is no pressure, cause I have over 75K in risk capitol. However, as a newer trader who wants to survive to be a non-newer trader, I don't yet trade much size. Since I don't trade much size I don't have any use for much more than the minimum in my account. Since I can get a better return on unused monies somewhere other than a trading account, I keep my unused monies somewhere other than a trading account.

So, thusly I have the knowledge and experience to discuss such without having experienced any pressure.

JB

 

[Turok]

>* Broker is member of NASD = daytrading under
>$25k OK with margin statused account, but not
>allowed use of margin.

Not with any of my brokers (MB, IB, Protrader).

JB

 

[neo_hr]

Guys this has been disscused over and over but let me tell you two things (as Ive been speciffically told by IB and Datek) :

1. No 25k NO DAYTRADING more than 3 times in 5 days (settlement is still realtime. When you become a PDT than you have 90 day restriction and THEN T+3 comes into effect)
2. No daytrading below 25k...

Alex

P.S. Trust me, I know what Im doing

 

[MD-doc]

Hi Neo-hr,

Could you be kind enough, and E mail me privately your
FUTURES' Bookmarks ???

Many thanks and wish you, Happy Holidays

MD-doc