I have been preparing to go live for a while now, but the PDT rule has made it a lot more complicated. I am sure most of you did not start with a balance of $25,000, so I would like to ask how you all got started with a limit of 3 day trades a week on a margin account. I understand that a cash account is an option, but I am not ready to opt for that. If that is what you all used to get started I will probably follow in your footsteps. I am just looking for some guidance by some succesfull traders. So to sum up my question, what should I do to get started with an account balance of a few thousand dollars. As with the PDT rule I can only complete 3 day trades a week. Thank you for your guidance.
I am a new trader with under $25,000 looking to day trade, what should I do to start?
- Thread starter Peter S
- Start date
Is it possible to trade something that doesn't fall under PDT rules?
It sounds like you need capital and experience. At this point, your time seems best served by building up capital and trading knowledge by reading this site, books, and by using (Or continue using) a trading simulator in your spare time.
Please don’t feel you might be missing out on the potential of making a fortune. Even reaching the extremely exceptional hyper-performance level of a 100% annual return on your starting capital of a few thousand dollars will not change your lifestyle. It could actually make your lifestyle worse as you may not be taking the time to maximize your job skills or whatever your current source of income is.
Yes, this sounds like a downer, but this is practical advice that I hope you heed sooner rather than later. Invest in your life skills first, obtain a higher level of success there before attempting to compete against the very smart, educated in finance, and well capitalized traders and firms that lurk in intraday trading.
Open 2 margin accounts at different brokerage firms with $12,500 in each. Now you can make 6 trades per week.
Robert Morse
Sponsor
I would suggest you consider a cash account. A cash account has no PDT rule, you can't short, you get no leverage and you have to wait 2 days for stock trades to settle. Then, if you trade liquid stocks with liquid options, learn to use long options as a stock replacement. Options require less cash and settle in one day so you do not have to wait as long and can DT each day. Then the other option is to learn to trade futures which also has no PDT rule.
In general, assume the use of options will require more skill and futures will have more risk as they are highly leveraged.
Until you're consistently profitable the PDT rule is there to help you survive long enough to become good at the game.
Daytrading isn't the only form of trading, but it is the hardest. You might benefit more from the experience of planning and managing longer term trades at this stage.
However you trade, you absolutely must have a strategy that is straightforward to learn and run, and which has a positive expectancy.
Daytrading isn't the only form of trading, but it is the hardest. You might benefit more from the experience of planning and managing longer term trades at this stage.
However you trade, you absolutely must have a strategy that is straightforward to learn and run, and which has a positive expectancy.
Seriously, do not even think about daytrading stocks untill you have at least 35k, better 40k.
Your 25k should never be touched and is basically just buying power. Your risk capital is everything above 25k.
So lets asume you put together 27k. A direct access setup would be around 800$/m with Lightspeed/Sterling + datafeeds, so that gives you 2 months of infrastructure plus 400$ of leeway. You have zero chance, I'd say.
"But...but, I'll be using ToS/IB/*insert discount broker of choice* and their datafeed, so my costs would be zero" Concrats my friend, your orderflow is getting sold and you never get any fills...except the shitty ones. You also have no chance here.
So my advice depends on how you will be trading:
- You are drinking cool aid from Warrior Trading et. al. -> doesn't matter which setup you go, you'll be broke in the end anyways.
- You are the one trade a day/probably 4-5 trades a week trader. Open two margin accounts, get 6 trades a week or use vertical options spreads.
- 10-20 executions per day? Save at least 35k and get direct access.
If you are not trying to implement a system you've prepared for the last two years that requires you to trade stocks, don't trade stocks at all.
I don't think there's a market that is more skewed against the retail trader than equities (except for probably cash bonds). You'll be behind in infrastructure, market access, costs and things you can do (ever tried to use an ISO order?).
So if you are flexible with regards to market choice, trade futures, options or crypto with the latter being the most level playing field.
Your 25k should never be touched and is basically just buying power. Your risk capital is everything above 25k.
So lets asume you put together 27k. A direct access setup would be around 800$/m with Lightspeed/Sterling + datafeeds, so that gives you 2 months of infrastructure plus 400$ of leeway. You have zero chance, I'd say.
"But...but, I'll be using ToS/IB/*insert discount broker of choice* and their datafeed, so my costs would be zero" Concrats my friend, your orderflow is getting sold and you never get any fills...except the shitty ones. You also have no chance here.
So my advice depends on how you will be trading:
- You are drinking cool aid from Warrior Trading et. al. -> doesn't matter which setup you go, you'll be broke in the end anyways.
- You are the one trade a day/probably 4-5 trades a week trader. Open two margin accounts, get 6 trades a week or use vertical options spreads.
- 10-20 executions per day? Save at least 35k and get direct access.
If you are not trying to implement a system you've prepared for the last two years that requires you to trade stocks, don't trade stocks at all.
I don't think there's a market that is more skewed against the retail trader than equities (except for probably cash bonds). You'll be behind in infrastructure, market access, costs and things you can do (ever tried to use an ISO order?).
So if you are flexible with regards to market choice, trade futures, options or crypto with the latter being the most level playing field.
If you open an account @ TD Ameritrade, get approved for that account to be a margin account. The problem is you must keep the account value above $25,000. One way to insure that is to transfer stocks you own into that account to maintain the $25K then add some other cash to that margin account and just trade with the extra cash. A margin account will turn into a full blown day trading account after you've done 5 or so "swing trades same stock" with 5 days. Do that with the cash you have and your account will turn into a trading account very quickly. The key is to keep account balance above 25K.
Disagree. The more liquid the instruments you trade are, the tougher the competition. This is why I consider forex to be the most difficult market.
Agree that 35k is a good number to start, the 10k buffer is necessary.
I wasn't talking about difficulty. I think you're correct that probably the most difficult market is FX. But thing is, even in FX you can get access to Tier 2 market (while Tier 1 market being interbank with custom credit lines that isn't much different from Tier 1 in terms of bid/offer spreads) at a relatively ok cost and you don't have an execution disadvantage (when you are smart enough to get a broker without last look policy).
Equities however, are a three-class market with darkpools being class one, lit direct acces is class two and retail class three.
Retail is just not profitable for daytrading, period. Execution disadvantage makes it impossible, so direct access is the only way to go...but then there's the overhead, which is massive for a retailer.
In futures prop shops I was used to 1500$/m lease for TT...but at least you could get up to meaningful size pretty quickly if you were any good.
~1k/m for all exchanges' books plus frontend in equities? That's massive overhead for a daytrader at home and you don't get rebates on commissions or exchange fees like you do in a futures prop shop.
Then there's darkpools and interdealer market. This is were the money is made since everyone trades off of retail/fund orderflow. Access to that market? No way.