floating a trial balloon concerning pdtr regulation

[hii a_ooiioo_a]

If it affects the professional trader if his account falls below $25,000. It affects the professional trader if he decides to open an additional account and doesn't have enough to fund a second account with $25,000, or simply didn't want to transfer that much into the new account for reasons of his own. It affects the professional trader if he trades stock options, because the price of stock options is deducted from the equity that counts toward the $25,000 minimum, and he can find himself with less than $25,000 counted in his account, even though he actually has more than $25,000 in the account. It also affects any trader who for whatever reason decides to open a cash account, because now you have to wait three days to get to re-use your money after selling stock from a cash account.

Unless by "professional trader" you mean someone who works at a prop firm or investment bank, in which case it doesn't affect them.

 

[daniel_m]

hiaoooooooo,

if someone is on the borderline of dropping below $25k, i'd really have to question just how much of a "professional" trader he really is....

 

[BCE]

Quote from daniel_m:
hiaoooooooo,
if someone is on the borderline of dropping below $25k, i'd really have to question just how much of a "professional" trader he really is....

Nothing personal, or maybe it is, but don't be a wealthy trader snob. Who cares if people are "professionals" or not. People should be able to trade with any amount of money they choose as often as they like. We don't need Big Brother running our lives. Perhaps we should regulate how many lottery tickets people can buy per week and issue different colored identification cards with our photos and finger prints on them based on our net worth and annual income showing how many tickets in our weekly allotment. Of course this would never happen as the state governments get too big of a cut from this action. The realities of this rule are political and financial in nature and have nothing to do with "protecting" newbies from themselves. Get a clue if anyone feels this way. They don't want our competition. They don't want the spreads narrowed. And in the current political climate in regard to the markets and all the crap that's gone down this last year, the SEC and other agencies are looking to regulate more not less. The firms that committed the biggest heists in human history have basically gotten off with a very weak slap on the wrist with a few prosecutions of sideline players to make it look good. The big players have political clout. We don't. We have about as much political clout as homeless people = next to none. Don't kid yourselves. That's just the way it is.

 

[bobcathy1]

The PDT rule ticks me off too.
I only risk small amounts in my trading, but I have to put another 25k in a NON INTEREST brokerage account to be able to day trade.
Now I decided not to day trade the account and want to take most of it out except the amount I swing trade. What a mess this is. Trade Station said they can't open a new non-day trading account for me unless I put a different name on it.
Joke is, I have one at IB now. Plus a futures account.
Makes no sense to me.

 

[nitro]

Quote from hii a_ooiioo_a:

If it affects the professional trader if his account falls below $25,000. It affects the professional trader if he decides to open an additional account and doesn't have enough to fund a second account with $25,000, or simply didn't want to transfer that much into the new account for reasons of his own. It affects the professional trader if he trades stock options, because the price of stock options is deducted from the equity that counts toward the $25,000 minimum, and he can find himself with less than $25,000 counted in his account, even though he actually has more than $25,000 in the account. It also affects any trader who for whatever reason decides to open a cash account, because now you have to wait three days to get to re-use your money after selling stock from a cash account.

Unless by "professional trader" you mean someone who works at a prop firm or investment bank, in which case it doesn't affect them.

Professional trader to me means someone who derives their living solely from trading. Proprietary traders (e.g., ETG, Worldco, etc) and traders at Professional firms (Bright, Echo, etc) almost certainly fit that description, but even in this case, I know of some that trade during the day, and then go off to another job to make ends meet. Are those professional traders? Almost certainly not. IMHO, they are "would be" professional traders.

1) How do you expect to make a living trading 25K? Assuming 100% gain/year, that's 25k/year?

2) Opening an additional account is a good reason, but in my experience, that second account is used in case your primary broker goes down, not as a day to day trading vehicle and therefore does not need day to day trading priviledges.

3) Options trading - I don't get this one - why not use the extra money you would have used to fund a new account and use it in your primary account? 2 + 2 = 4 whether it is in the primary account or the newly funded one.

4) Cash Account? I don't know of a single professional trader that derives his living from a cash account of less than 25K.

nitro

 

[nitro]

Quote from BCE:

Nothing personal, or maybe it is, but don't be a wealthy trader snob. Who cares if people are "professionals" or not. People should be able to trade with any amount of money they choose as often as they like. We don't need Big Brother running our lives. Perhaps we should regulate how many lottery tickets people can buy per week and issue different colored identification cards with our photos and finger prints on them based on our net worth and annual income showing how many tickets in our weekly allotment. Of course this would never happen as the state governments get too big of a cut from this action. The realities of this rule are political and financial in nature and have nothing to do with "protecting" newbies from themselves. Get a clue if anyone feels this way. They don't want our competition. They don't want the spreads narrowed. And in the current political climate in regard to the markets and all the crap that's gone down this last year, the SEC and other agencies are looking to regulate more not less. The firms that committed the biggest heists in human history have basically gotten off with a very weak slap on the wrist with a few prosecutions of sideline players to make it look good. The big players have political clout. We don't. We have about as much political clout as homeless people = next to none. Don't kid yourselves. That's just the way it is.

Go to any firm and ask them for the statistics on how much money one needs to be able to put in play in order to make a living trading.

No doubt there will be some that are able to trade a 10K account into 60K in a year, but for every one of those there are 1000 that turn 10K into zero in three months.

IMHO, undercapitilalization and lack of "training" are the two enemies of the would be trader. The extra effort needed to be able to trade because of the PDT rule should be seen as a "good" obstacle to overcome (there are many,) not as ball and chain or a controlling force in your life. For those that cannot or would rather not put their money on the line, the ETG or Worldco route is a good one, perhaps the best one _even_ with enough money for some.

As to gambling, IMHO, you are right - no one should dictate that you should/should not be allowed to do it. But then, you would fail the _definition_ of a professional trader if you think "they" are regulating your capacity to gamble if you want to TRADE.

nitro

 

[hii a_ooiioo_a]

If a trader finds himself needing to withdraw funds from his account for whatever reason, whether for an unexpected emergency, or for some other use, or because it may be his individual preference to regularly sweep his account down to a certain level, he may find himself affected by these daytrader restrictions.

Why people might choose to open various accounts would vary from person to person. For some of them, their strategy of having more than one account, for whatever reason they may have devised that strategy, may be affected by the existence of these restrictions. They can work around it, but having to work around it does constitute "being affected" by these rules.

If you know of any professional trader that derives any part of his living from a cash account of more than 25K, they are still affected by these rules. Less than 25K, more than 25K, makes no difference with a cash account. Cash accounts have been affected by these rules in this way:
Before the PDT rules, a cash account, at least at some brokers, could give its owner immediate access to the proceeds of stock sales. As long as the broker was not providing leverage to the cash account, no one was too concerned that they had to be strict in their interpretation of the three day settlement period. Since the PDT rule however, you have to wait like a lame duck for three business days for cash to appear in your account balance after a sale, because otherwise the broker could be accused of "lending" you money by not making you wait, and thus allowing you to circumvent the 3 in 5 daytrading limitations.

If options trading is part of a professional trader's basic strategy, it doesn't matter if he has more than $25,000 in his account. The options in the account are not included in the calculation of the $25,000 minimum. You could have an account with $40,000 in it, and if you buy $20,000 worth of options your account permissions are immediately subjected to the same limits as anyone with less than $24,999.99 in their account.


Odds are that these restrictions will never directly affect you, Nitro, personally. But they will affect some professional traders, which is what you asked. Even if the extent of their effect is to make a person adjust their strategies to avoid these restrictions, that constitutes "affecting" them.

 

[BCE]

Quote from nitro:

Go to any firm and ask them for the statistics on how much money one needs to be able to put in play in order to make a living trading.
No doubt there will be some that are able to trade a 10K account into 60K in a year, but for every one of those there are 1000 that turn 10K into zero in three months.
IMHO, undercapitilalization and lack of "training" are the two enemies of the would be trader. The extra effort needed to be able to trade because of the PDT rule should be seen as a "good" obstacle to overcome (there are many,) not as ball and chain or a controlling force in your life. For those that cannot or would rather not put their money on the line, the ETG or Worldco route is a good one, perhaps the best one _even_ with enough money for some.
As to gambling, IMHO, you are right - no one should dictate that you should/should not be allowed to do it. But then, you would fail the _definition_ of a professional trader if you think "they" are regulating your capacity to gamble if you want to TRADE.
nitro

nitro,
Who said anything about professional trading and earning a living from trading? I know some people in the thread brought that up but that's not the issue here in my opinion. The thread is about the PDT rule not how much capital one needs to realistically earn a living from trading. And of course having more capital guarantees nothing really. Success in the markets comes from being skillful mainly with a little luck thrown in for good measure. More capital can help but less capital should not be a regulated restriction to trading. If someone wants to trade once or twice a day with say $5,000 (which becomes $10,000 on margin) and try and make let's say $100 extra a week to supplement their income then why shouldn't they be allowed to do this? It's their money. It's their time and effort, etc. They're the ones taking the risk. What's the problem? If some grandma or grandpa or some student or housewife watching her kids or whoever wants to do this what's the problem? But of course they can't do this under these rules. Or they are forced to swing trade which to my mind, in this market, with all that's going on in the world and with individual companies can be even more risky. Or at least they shouldn't be forced to swing trade. How many people here at ET feel they could make $100 a week or more trading daily with $10,000 in a margin account with unrestricted trading? So what's wrong with that?

 

[Phantom Trader]

I think Nitro feels that these issues aren't relevant to the group that the Elite Trader Forum is intended to serve. To the extent that they don't affect the "professional trader", he may be right.
To the extent that they may affect even some professional traders, these issues do become relevant to Elite Trader's target audience.

__________________
Emergency exits, doctors' entrances, strict nurses on duty, keep costs down, stays both long and short - BUT ABOVE ALL, YOU GOTTA HAVE INSURANCE

 

[gaj]

i think the bigger fear, rather than a "you must have 25k to daytrade", is that the rule that dictates a *certain* amount of money you must have to trade in a *certain* fashion.

after all, the 25k rule is in. what's to say, in a year or 2, the amount to trade (if you're not 'professional', or a member of a firm) isn't upped to 50k? or 100k? or 200k?

there should be no rule, of course. caveat emptor, and all that stuff.