With T+1 you should use a cash account, it avoids those pesky calls.
Pattern day trader
- Thread starter Zebra37
- Start date
It is mandatory. It is an SEC rule that brokers must follow.
With that being said, I think brokers have a very, very narrow band of discretion in which they can recognize that mistakes happen, e.g., order entry errors by the retail customer, that might trigger PDT status when the customer's intent was something different. And once an account is restricted due to PDT status, the broker may also have some discretion as to how long the restrctions are in place, i.e., there is a minimum established by the SEC, but the broker can choose to make it longer.
The PDT rule is silly, but who ever said the SEC knew how to make logical rules? It's so bad that if you opened an account abroad, the long arm of the SEC prevents foreign brokers from allowing US citizens to PDT. American hegemony at its best...
That said, $25,000 today isn't what $25,000 was in 2001 when the rule was implemented (if it were indexed for inflation it'd be $45,000 today). Let's hope no bureaucrats are reading this post and saying 'Gee, we really need to protect these poor people... let's index it for inflation!"
There are two ways around the problem: focus on futures (now with MES 1 contract = 50 shares of SPY), or go to one of those prop houses that lets you trade with a smaller deposit like 5-10K. The latter is a terrible choice because the fees are way expensive (plus some require a series 7 license which means your data fees will be charged at pro rates). You may be paying as much as $500 a month for the experience and deal with minimal account lockup periods of 12 months.
The problem with futures is you're pretty much stuck trading stock indeces which may not be the game you're suited for. Other instruments like gold and natural gas have very big contract sizes and you will get creamed fast in those.
So if you're really into trading stocks (probably a good idea since you can do it part-time), go to uncle Tony and give him your car title as collateral. Just because you've got $25K in your trading account doesn't mean you have to trade with size. 10 shares at a time or even 1 is fine, so you can keep the level of bleeding low. And the best news is most brokers will let you keep that money invested (e.g. index funds or bond funds) so you can trade with that capital while it is put to work, just have a small cash buffer. And don't short biotech!
That said, $25,000 today isn't what $25,000 was in 2001 when the rule was implemented (if it were indexed for inflation it'd be $45,000 today). Let's hope no bureaucrats are reading this post and saying 'Gee, we really need to protect these poor people... let's index it for inflation!"
There are two ways around the problem: focus on futures (now with MES 1 contract = 50 shares of SPY), or go to one of those prop houses that lets you trade with a smaller deposit like 5-10K. The latter is a terrible choice because the fees are way expensive (plus some require a series 7 license which means your data fees will be charged at pro rates). You may be paying as much as $500 a month for the experience and deal with minimal account lockup periods of 12 months.
The problem with futures is you're pretty much stuck trading stock indeces which may not be the game you're suited for. Other instruments like gold and natural gas have very big contract sizes and you will get creamed fast in those.
So if you're really into trading stocks (probably a good idea since you can do it part-time), go to uncle Tony and give him your car title as collateral. Just because you've got $25K in your trading account doesn't mean you have to trade with size. 10 shares at a time or even 1 is fine, so you can keep the level of bleeding low. And the best news is most brokers will let you keep that money invested (e.g. index funds or bond funds) so you can trade with that capital while it is put to work, just have a small cash buffer. And don't short biotech!
Yes, but the liquidity on them generally is not as good as the full size so you can be in for some good slippage for trading intraday. MES by contrast compares favorably to ES.
Getting back to the OP, I don't know what your objectives are, but if you have enough money to PDT (or can arrange it) I highly suggest that route. This way you have maximal flexibility: stocks, stock indeces (trading SPY, QQQ, IWM) and you don't need much to open an FX account on the side. That'll let you experiment and see what works best for you, and you can use very small size (nowadays commissions are very cheap). You're not putting $25k on the line, unless you're foolish enough to short volatile stocks overnight.
When you get shoehorned into trading futures it may simply be the wrong market for you and then you're charging uphill. Same goes with FX. There was a long time where near zero interest rates made FX lame, and I remember how I got destroyed with EUR/USD and wasted so much time trying to get that to work simply because I had no money to do futures or PDT.