Remove the Pattern Day Trading Rulle - Vote

[DmanX]

Quote from truehawk:

The PDT rule was written because the MMs would not trade with small SOES lots at their posted prices.. They would dance the fantango raising their shirts and screaming as if they saw a mouse in an attempt to avoid trading, and this made the Nasdaq stocks a lot more volitle, not because of the SOES traders but because of the MMs response to them. Companies were leaving Nas to go to the NYSE because of this MM induced volatility.

The PDT rule was a pure sop to the MMs. Their leverage and spread was not enough, they needed protection from the little guys who DID NOT lose that much. So the house had to adjust the rules of the game.


If the PDT rule was intended to protect the small investor it would have been a loss limit. Say that a new account below 25K would have an automatic stop loss of 20% of the account.

If they need new liquidity they need to eliminate this POS sop.

But the same thing can be done with a $30K account just as easily. So I don't know if the conspiracy theory holds up all that much. More than likely it was congress's reactionary response to the frenzied losses sustained by stock daytraders who made easy money during a bull market but never learned to trade a bear market and got killed.

And the rule is effectively is a stop loss. For those with account greater than $25K, they would want to manage their trading such that they don't fall below and enter into the PDT category. And those with less than the $25k required would want to adjust their trading strategy (ie swing trade) to avoid the trading ban that most brokers place on you if you're flagged as a PDT.

 

[YngvaiMalmsteve]

Quote from DmanX:

And those with less than the $25k required would want to adjust their trading strategy (ie swing trade) to avoid the trading ban that most brokers place on you if you flagged as a PDT.

But that's not effectively a stop loss. If anything, it's the opposite. One of my worst trading losses came when I bought a position near the close, intending to hold overnight. Then I saw the position move against me dramatically after-hours. I couldn't get out because of the PDT. I ended up taking a much larger loss than I would've ever allowed myself if I had been able to exit freely.

 

[Tradestreet]

pdt rule should be eliminated. just because you can afford to have 25k in an account, does not mean u have any clue how to trade and manage risk.

 

[DmanX]

Quote from YngvaiMalmsteve:

But that's not effectively a stop loss. If anything, it's the opposite. One of my worst trading losses came when I bought a position near the close, intending to hold overnight. Then I saw the position move against me dramatically after-hours. I couldn't get out because of the PDT. I ended up taking a much larger loss than I would've ever allowed myself if I had been able to exit freely.

But that's, no offense, your own fault since you failed to monitor and properly anticipate what would trigger the PDT flag. Had you had done your due diligence, you wouldn't have entered the trade to begin with.

 

[athlonmank8]

Quote from Handle123:

I think the Pattern Day Trading rules are good, Many people who are in the worst way due to layoffs come to the markets as a way to make fast money cause of being out of work. Many will not go to Futures cause of the speed and leavage and lack of knowledge, but everyone thinks they understand stocks. I think the family should come first in the worst of times and throwing it to the winds with little funds and little experience is disaster.

You can't come 5 hours late to a party and not expect to look like an idiot. There's no exception with your post either

 

[DmanX]

Quote from Tradestreet:

pdt rule should be eliminated. just because you can afford to have 25k in an account, does not mean u have any clue how to trade and manage risk.

It's not about that really. It's partly about disposable income and the lack thereof.

Ask yourself this question. Why does the PDT only apply to stocks and stock options?

Do you remember the media induced public outcry back then in 2000 about daytraders and their effect on the stock market which lead to the rule enactment in 2001?

 

[DmanX]

Quote from athlonmank8:

You can't come 5 hours late to a party and not expect to look like an idiot. There's no exception with your post either

Why do you need to insult everyone who doesn't agree with you?

You look kind of silly arguing about the lack of merit of PDT rule when there are alternatives. And if you are as savvy as you portend, you'd move into those markets and never look back.

Real professionals adapt.

 

[YngvaiMalmsteve]

Quote from DmanX:

But that's, no offense, your own fault since you failed to monitor and properly anticipate what would trigger the PDT flag. Had you had done your due diligence, you wouldn't have entered the trade to begin with.

Ummm, no, the entire reason I entered the trade right before the close was because I was planning on holding overnight. I had a rule to never enter trades in the middle of the day when I was out of day trades. So, yes, I had done my "due diligence".

 

[DmanX]

Quote from YngvaiMalmsteve:

Ummm, no, the entire reason I entered the trade right before the close was because I was planning on holding overnight. I had a rule to never enter trades in the middle of the day when I was out of day trades. So, yes, I had done my "due diligence".

Then how did you trigger the PDT? Surely you must have known that in the event that you needed to get out of the trade sooner rather than later (reg-t settlement) you would stand to trigger the PDT.

It appears that you had already done 2 round trip trades in less than 5 days. Putting on one more trade without factoring in the need to possibly exit immediately would trigger the PDT, is not what I would call due diligence.

Unless there is something missing in your example.

 

[YngvaiMalmsteve]

Quote from DmanX:

Then how did you trigger the PDT? Surely you must have known that in the event that you needed to get out of the trade sooner rather than later (reg-t settlement) you would stand to trigger the PDT.

It appears that you had already done 2 round trip trades in less than 5 days. Putting on one more trade without factoring in the need to possibly exit immediately would trigger the PDT, is not what I would call due diligence.

Unless there is something missing in your example.

I didn't trigger the PDT. My point was I couldn't exit without triggering it. The stock had showed a trend of closing strongly and gapping up the next day. It was closing strongly so I bought it right before the close. The entire intent was a swing trade. However, there was unanticipated news after hours, and the stock ended up gapping down rather than up the next day. I couldn't get out the same day upon the news and had to eat a bigger loss the next morning.

My whole point is to show that swing trades don't act as stop losses. Because stocks can gap up or down significantly on unexpected news, a swing trade is, in some ways, inherently more risky than a day trade.