Info: Pattern Day Trading rule does not apply to cash accounts!

[tomkat22]

absurd statement

Okay I'm all ears. How does one go about shorting a stock in a cash account? Always looking to learn something new. Most are extremely time sensitive and I'm not sure puts would address that fact,although I admit I dont trade options.

 

[MacBookProHo]

I just learned that the infamous "Pattern Day Trading (PDT)" rule (that limits the number of day trades for accounts < $25k) applies only to margin accounts, but not to cash accounts!

See also:

https://robinhood.com/us/en/support/articles/pattern-day-trading/
"Pattern day trading restrictions don’t apply to cash accounts. (They only apply to margin accounts, like Instant and Gold.) This means you can trade stocks, ETPs, and options without worrying about your number of day trades.
"

https://topratedfirms.com/trading/day/ameritrade-pattern-day-trade.aspx
"PDT rule does not apply to cash accounts. Therefore, TD Ameritrade allows unlimited number of day trades on cash accounts.
"

This is awesome news for the little guy.
No barriers exists....to grow a $2,000 account into a million in under a year with options trading.

Instead of eating McDonald's chicken everyday for lunch....normal people will be able to afford a ribeye or filet mignon steak.
Some will even probably generate six figure days.

 

[Pekelo]

I just learned that the infamous "Pattern Day Trading (PDT)" rule (that limits the number of day trades for accounts < $25k) applies only to margin accounts, but not to cash accounts!

You are correct. Anybody knows the reason why? Why limit one type but not the other?

 

[KCalhoun]

I think new traders will benefit from learning using a cash account... because it slows things down, and avoids leverage.

 

[tiddlywinks]

You are correct. Anybody knows the reason why? Why limit one type but not the other?

Could it be so brokerage house risk is minimized or entirely eliminated?

Oh wait... PDT provides protection to the investor. Yup.
Brokerage house risk must be the wrong answer.

 

[SunTrader]

You are correct. Anybody knows the reason why? Why limit one type but not the other?

Obviously you don't trade, just snipe at Bitcoin hodlers.

 

[Pekelo]

and avoids leverage.

[cough] options [cough]

That is why I asked my previous question. In a cash account you san still trade away your money in a few days using options, so that doesn't really slow down anything...

 

[earth_imperator]

You are correct. Anybody knows the reason why? Why limit one type but not the other?

I think b/c with a margin acct it's the money of the brokerage firm, but with a cash acct it's the own money of the trader.

 

[Pekelo]

I think b/c with a margin acct it's the money of the brokerage firm, but with a cash acct it's the own money of the trader.

That is true, but as long as the brokerage has good risk control and don't let the customer go negative, why does it matter? After all they make more money if you trade more, so limiting your trades is counter productive to their profits. Also a bad trade can screw up all the account, it doesn't have to be daytrade.

I thought originally the PTD rule was made for protecting customers from their own stupidity and that they wouldn't try to daytrade with small account. RobinHood throw that idea out of the window.

 

[tiddlywinks]

That is true, but as long as the brokerage has good risk control and don't let the customer go negative, why does it matter? After all they make more money if you trade more, so limiting your trades is counter productive to their profits. Also a bad trade can screw up all the account, it doesn't have to be daytrade.

I thought originally the PTD rule was made for protecting customers from their own stupidity and that they wouldn't try to daytrade with small account. RobinHood throw that idea out of the window.

1) You seem to have forgotten that PDT minimum account equity of 25,000 is REQUIRED AT ALL TIMES regardless of trade style... daytrade, swing, investment, doesn't matter when you are flagged for PDT.

2) PDT was implemented in 2001.
Robinhood started in 2015.