Patterned Day Traders

[Sharky]

I read this on the Interactive Brokers website. Since I've only just opened an account with them, could any of our US traders conirm whether you do need $25,000 in your account to make four or more trades within 5 business days. I was hoping to fund my account with less than this, since the minimum opening balance is as low as about £1,500.

Cheers Sharky..

The NYSE and NASD have imposed rules to limit small investor Day Trading on US stock and options. Customers who have made four or more US stock or option day trades (link-open and close a position on the same day) within five business days in their account are considered "Patterned Day Traders". "Patterned Day Traders" are required to hold a minimum of $25,000 in "Equity with Loan Value", and therefore those customers without this minimum "Equity with Loan Value" will not be allowed to complete a fourth day trade within five business days. The restriction will remain until the customer no longer meets the definition of a "Patterned Day Trader". The Day Trading margin requirements are in effect from 9:30am to 3:55pm NYT each trading day, and at 3:55pm each trading day regular stock margin requirements will govern until the opening of the next trading day. "Patterned Day Trading" margin requirements are as follows:

 

[TraderPattern]

Yes, Sharky, IB requires that you deposit at least $25k if you want to daytrade. This is a new SEC rule.

Different brokers interpret this rule in different ways. It is possible that cash daytrading (which has no requirement for $25k) is enabled through Datek.com ... the downside is that you will not be able to go short, since a short transaction is marginable, and the new rule stipulates that all marginable transactions require a minimum of $25k in your account.

Fear not, Stock Futures on Nasdaq big caps are soon available (if not already available)... you will not need $25k in your account for these (and the futures will move precisely with the stock). With a Level2 screen of the underlying you should be able to play the futures with a bit of practice.

 

[Naz]

Different brokers DO interpret this rule in different ways.It therefore can be very beneficial to talk to someone behind the scenes for some advice.

Try Oscar Montenegro at Nobletrading.com he is extremely good at offering VERY beneficial advice on this ruling as well as offering an internet account for trading the Nasdaq and 4 types of level 2 trading platforms.Rates for trading can also be negotiated.Be sure that you mention exactly where you are in your trading knowledge as regards the US markets so you get the right type of feedback.Demo's can be downloaded for a preview.

[email protected] (www.Nobletrading.com)
212 809 4833
212 810 2200

80 Wall St #218
New York
NY 10005
---------------------------
Or Rufus Low at Options Direct
0207 903 6350
0207 903 6100

Suite 831
6th Floor
Salisbury House
London Wall
London EC2M 5QQ

He will be able to explain how this rule does not come into play for his company as well as giving information on internet and Nasdaq level 2 software they supply for trading US markets.

 

[bkopp]

Trading the E-MINIS

Hello,

I believe I know the answer to this question, however, I want to be sure. My understanding is that the Patterned Day Trader rules apply only to stocks and options and NOT the e-minis. Am I correct in my assumption that one does not need 25k in equity in order to day trade the Nasdaq or S&P e-minis?

Thanks for your help.

bkopp

 

[Trader333]

Yes you are correct.


Paul

 

[Skimbleshanks]

Correct bkopp, you don't need $25k to daytrade eminis.

And welcome to T2W.

 

[Skimbleshanks]

Sharks:

Four or more daytrades within five business days is considered a PDT (pattern day trader).

However, IB limits you to three daytrades within five business days if you have less than $25k in your account. You know at any time how many daytrades you have left, as they very kindly indicate this on your account, so you can see easily.

 

[bkopp]

Thank you both for your help and the quick reply.

bkopp

 

[pttrader]

I read this on the Interactive Brokers website. Since I've only just opened an account with them, could any of our US traders conirm whether you do need $25,000 in your account to make four or more trades within 5 business days. I was hoping to fund my account with less than this, since the minimum opening balance is as low as about £1,500.

Cheers Sharky..

The NYSE and NASD have imposed rules to limit small investor Day Trading on US stock and options. Customers who have made four or more US stock or option day trades (link-open and close a position on the same day) within five business days in their account are considered "Patterned Day Traders". "Patterned Day Traders" are required to hold a minimum of $25,000 in "Equity with Loan Value", and therefore those customers without this minimum "Equity with Loan Value" will not be allowed to complete a fourth day trade within five business days. The restriction will remain until the customer no longer meets the definition of a "Patterned Day Trader". The Day Trading margin requirements are in effect from 9:30am to 3:55pm NYT each trading day, and at 3:55pm each trading day regular stock margin requirements will govern until the opening of the next trading day. "Patterned Day Trading" margin requirements are as follows:

I have a margin account at Lowtrades.com. However it is also set up with a cash account. I have ALL my capitol in the cash side of the account and trade only from it. They let me use my capitol once per day. For instance, I could buy LTON long and sell it. Then the NEXT day they allow me to use that capitol again to buy back into the same stock if I wish, or another stock. If I have enough capitol I can buy and sell as much in one day as my capitol will allow but each transaction reduces my capitol available for the day. If I make 5 roundtrip trades in one day that uses up all my capitol then that is all I can trade for the day. However, the NEXT day Lowtrades credits all the cash back into my account from the roundtrip as available cash to trade. It is not exactly the same as daytrading on margin but it is almost like it. In a sense it is daytrading on cash. Somehow they let me do this. Datek I understand in a cash account makes you wait 3 days from a roundtrip trade to be able to use that capitol again.

Anyway, you can open a margin account with 2,000.00. I think they automatically assign you a cash account also. Just put your money in the cash side and go to town trading. Just make sure when you place your trades you have the cash side selected.

Lowtrades charges 5.00 per side - unlimited shares. If one opens a strictly cash account then no min. is required.

Of course you can only go long but it is like daytrading long in a cash account.

Seems like brokers interpret the law in different ways.

 

[bigtimetrader]

That is correct. That is an NASD and SEC rule.
The ONLY way to get around that rule is to use a non-US broker. Foreign brokers don't have to follow that rule because they are not governed by the NASD.

You might want to check the website: www.alldaytraders.com
They are a foreign broker who lets you trade US markets. My friend has been day trading there everyday without restriction and getting 4 to 1 buy power for a couple months now and his account is only worth about $11,000 USD .