On a $5k stock account? Guess penny a share really adds up?
The PDT rule is holding me back. And it makes no sense.
- Thread starter Risepoint1879
- Start date
On a $5k stock account? Guess penny a share really adds up?
Robert Morse
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They don't take $5000 accounts and that was an average of all accounts of all sizes.
I do not understand the why's and wherefore's of the PDT rule. I suspect is wasn't intended to protect small investors as much as it was to keep costs down for banks and brokerages.
I remember reading a book called Studies in Tape Reading by Rollo Tape (lol) which told the tale of two traders who had started together day trading 10 share lots. One of them was now trading over $100,000 (more than 100 years ago) while the other was still trading 10 share lots. I remember thinking at the time I read it that it is a shame that someone today could't take a $1000 and start learning to trade using 10 share lots because of the PDT rule.
At any rate, if all I had were $5000 I'd open a futures account and trade a one lot of the ES, NQ, or CL. I'd also do a good amount of watching, observing, and testing before I started trading futures with real dough. Actually I'd take $3000 and put the other $2000 away. $3K is more than enough to lose trying to see if you can cut it as a futures trader. And if you can cut it, you will never look at day trading shares again.
I remember reading a book called Studies in Tape Reading by Rollo Tape (lol) which told the tale of two traders who had started together day trading 10 share lots. One of them was now trading over $100,000 (more than 100 years ago) while the other was still trading 10 share lots. I remember thinking at the time I read it that it is a shame that someone today could't take a $1000 and start learning to trade using 10 share lots because of the PDT rule.
At any rate, if all I had were $5000 I'd open a futures account and trade a one lot of the ES, NQ, or CL. I'd also do a good amount of watching, observing, and testing before I started trading futures with real dough. Actually I'd take $3000 and put the other $2000 away. $3K is more than enough to lose trying to see if you can cut it as a futures trader. And if you can cut it, you will never look at day trading shares again.
You can lose that in minutes in equity futures these days, even with 1 contract. Try again.
Last edited:
Robert Morse
Sponsor
http://www.finra.org/investors/day-trading-margin-requirements-know-rules
Here is the why:
The primary purpose of the day-trading margin rules is to require that certain levels of equity be deposited and maintained in day-trading accounts, and that these levels be sufficient to support the risks associated with day-trading activities. It was determined that the prior day-trading margin rules did not adequately address the risks inherent in certain patterns of day trading and had encouraged practices, such as the use of cross-guarantees, that did not require customers to demonstrate actual financial ability to engage in day trading.
$3000 is 60 ES points. Other than May 6, 2010, when has the ES rolled 60 points in minutes?
I would bet that anyone on this forum who day trades the ES profitably would be quite comfortable with a $3000:1 contract day trade margin. You either know what you are doing and you are in control of yourself of you are not.
K, so minutes is a term I use a bit loosely, but it still bears validity. I mean, here's Dec 27th on the ES, from around 2PM ET to close.
The chart before that looked like it was going down, yeah? Pity those who went short then, only to watch it rise 90 points into the close, over 90 minutes.
But you are assuming an idiot is trading the account. I have had times were I shorted the low tick. Never occurred to me to let the loss run the rest of the day to see what would happen. I'm either flat or even flipped to long well before I'd take even a nine point loss. let along 90.
Again, other than B1S2 in the ES thread, who lets the market run against them without end?
The point is, $3,000 is not enough to trade one contract comfortably in futures. Period. Not these days.
Not if you are using 90 point stop losses it isn't!