Pattern Day Trader Question

ThinkOrSwim is now Ameritrade so not sure those deals exist any more. IB is a good choice or any per share broker with such small size. Suretrader is another option as offshore brokers are not subject to the $25k rule and they offer 6:1 leverage - but they have some customer service issues.

Also, ThinkOrSwim/Ameritrade has fairly good data/charting so it might be worth funding a small account with them just for the free platform even if you use someone else for the daytrading.
 
From Suretrader's site: "Swiss America Securities, Ltd (SureTrader) does not service accounts for U.S. citizens, U.S. residents or U.S. corporations."

What most people do who are starting is they deposit $30K. This way you have $5K to play with and $25K as the required buffer.

Personally I am against the Pattern Day Trader rule for the following reasons:

1. It should be the brokerages, not the government, that decides on the amount of margin required. In turn, the SEC makes requirements from the brokerage what kind of overall capital buffer it needs - and then it's the broker's problem how they solve it. The SEC states that brokerages had suggested during the comment period that $25,000 was a minimal buffer. If some company wants to offer less to benefit their customers, I don't see why that should be an issue.

2. You can burn through your money much faster trading futures than stocks, yet the margin requirement for futures is much smaller. There are brokerages who will let you open an account with under $2000.

3. You can still get around the pattern day trader rule if you go with a Series 56 'deposit shop'. The problem on top of taking an exam is you're stuck paying outrageous 'professional' data fees which are three times retail rates, so your fixed costs go up to like $500 a month.

Unfortunately since the SEC is an appointed, not elected body, and since you're not going to get hundreds of thousands of day traders writing to their congressmen to repeal the pattern day trader rule, it looks like we're stuck with it forever!

It's important whenever the SEC or FINRA comes out with these kinds of rules that people get very active during the comment period. Once regulations are established, they tend to be very sticky, especially post 2008 when nobody wants to take the blame for loosening a bolt somewhere that could cause another crash.
 
It's possible they already have some older accounts. Since the company is owned by the Swiss, it's not likely they'd want to anger the SEC or FINRA.

There's also a Russian brokerage, United Traders, but even they won't allow US accounts to access US equities markets citing US law.
 
Land of the Free, Free to do as your told, glad I don't live over there.

It's all a protection system, they don't want stupid rich drunk americans losing money outside of the USA.

That's why they banned Gambling sites that let you gamble with people out side of the USA, keeps the cash inside, it was soooooo easy years back, to find a rich drunk stupid american to part with loads of $$$'s.
 
I'm on the fence with the PDT rules. Overall I'd kill the rule because it's a free market and it's not like we're stopping people from buying bullshit at Costco or amazon.com: it's your money.

I sort of wonder what the impact would be on the equity markets, but I imagine that we're talking piker accounts going after super liquid securities, so I doubt intraday volatility would be that noticeable: maybe I'm wrong.

I do think that pushing people into futures (and worse: FX) is a nasty side effect. If the SEC's intent was to safeguard individual investors from bad decisions, pushing people into FX certainly wasn't inline with that goal.
 
Regarding impact on capital markets, the entire population of the US is about 318 million people strong. According to one statistic, about half have part of their assets invested in the stock market, so that's 159 million people.

Of them, I would honestly be surprised if more than 1% would become suddenly interested in day trading if the pattern day trader rule would be modified. That's about 1.59 million people. If the average account size was $10,000 (probably on the high side), that's 15.9 billion dollars of added liquidity to the system. Apple's stock turns over about 8.32 trillion dollars of shares a day on average (64MM shares X $130). So probably not a very sizable impact, but even if it were, it could only be a good thing. I doubt we'd run into the same level of risk as with the HFT world.

And besides, to be honest it's even a bit of double counting - many of those disenfranchised from day trading stocks are moving volume in stock index futures, which influences equity markets all the same.

It's just the usual scenario where some people ripped up their net worth by being careless and then the wailing voices started in, so the government felt they had to do something to look like they've addressed the problem. And there's no cost to the SEC for creating the rule. They know all too well that the disenfranchised would be traders are not going to show up to their door at night with torches and dogs, while had they done the opposite, some politician would get up on a podium and make a career out of shouting them down and calling for their resignation for their inability to 'protect the public'.
 
Doglover said:
Hi, I'm a bit new to day trading, just have a quick question. I wanted to get some clarification on the FINRA's $25,000 requirement for pattern day trading. I also don't want to use margins to trade as well. Is having $25,000 daily balance and/or a margin account absolutely required to day trade? I understand it takes 3 business days from after selling a stock before the funds are available again in your brokerage account (if not using margin), but what if I only trade 25% of my daily balance maximum, I wouldn't need margin access as the funds will always be available.

I plan on making approx 10 trades a day and Ameritrade support is telling me for day trading I don't need to maintain a $25,000 balance at all if I use a non-margin account (even if I day trade 300 times a month), but wanted to get a second opinion as don't want to be breaking any US law unintentionally.
More...
Trade futures instead of stocks. Preferably the indexes.
 
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