I wouldnt recommend anyone start ANY kind of business with less than 25k, whwen they are looking to pay their bills right off the bat, but people do it regardless, and some people end up being highly succesful after bootstrapping it to start the business, my only point is this.... "who is the government to take that chance away from people," when they will allow them too do just about anything else with their money. Like why is trading a more precarious business than starting a coffee shop? where do those regulations end? If you believe in PDT rules and you think its beneficial why not stop every other person who tries to start a business for themselves? I understand where you and Mav are coming from..... obviously its not a good idea to try to become a day trader with less than 25k, but if people and the government want to help someone why dont they put astronomical penalties on the vendors who pitch these unsuspecting people on a pipe dream, instead of putting the penalty on the people who want to try it?
Max, nobody is stopping anyone. You can do whatever you want with your capital. If I want to start a business, I have to go to a bank and apply for a loan. It's not easy. I have to have good credit and my business will be highly scrutinized. Look at how many people today still claim they can't get a loan. But you think you can go to TD Ameritrade and force them to give you 10k, 20k, 30k just because? Then what's the whole point to even applying for a loan? See, to get a portfolio margin account THAT is exactly what one has to do. They have to PROVE they understand options via a test and they have to pass a credit check and background check. Maybe they should do that for PDT as well. Remember, the broker is giving you a loan. I know most traders take it for granted and see it as an entitlement, but it's not. Now think about the success rate of daytraders vs say the success rate of someone borrowing money from a bank to start a business with "real cash flows".
I can appreciate everything you said, and i agree with almost all of it. PDT rules dont apply in Canada but my understanding is that if you dip below 25k you get limited to a certain number of trades, so if my understanding is accurate, why should the government be able to tell you cant trade under 25k, it just seems ridiculous. Im not sure if this is true on margin vs non margin accounts, but obviously i think its unwise to margin up a small account, but that doesnt mean you should not be allowed to do it, and the government should ban it.
Again, I'm sorry if I'm coming across as obtuse, but they are NOT saying you can't trade when your account dips under 25k, they are saying you can't BORROW the brokers money if your account is under 25k. Max, there is a huge difference there.
No need to be sorry dude, we go back like more than a decade now, im curious about this one too, since ive never had to deal with it in Canada. So do PDT rules mean you can only take "X" amount of trades under 25k? Or does it mean "X" amount of trades on leverage under twenty five k? Like if i have 24k and i buy and sell three different stocks in the same day is the end result that i can no longer trade for the week, or the end result is i have no more access to leverage for the week? I guess maybe i dont fully understand the rule since its never applied to me in canada.
Really.."you'll have a half dozen startups "... That will be under water when your pre-lunch trade from your example goes South instead of North. I'll also argue (rhetorically) that many smaller capitalized traders have probably been saved from themselves by this rule than have been hurt by some missed opportunity.
@Max E. ...I believe (as others have pointed out) that cash accounts are not an issue. The trade is paid, there is no lev, no risk to the BD.
Ok thx that helps, i never understood that they were just taking away leverage i thought that PDT meant you couldnt even trade your own money. :I would still say this though, i was trading through Echo, they were an amazing firm, but we needed a hundred million to float orders every day cause we were floating brackets to almost every single stock on the market, but they were OPG orders that were just designed to catch out of market prints, so 99.99% of the orders were never filled. After Dodd-Frank got passed no american broker was allowed to give people that kind of leverage, so we went to an offshore broker, where inevitably i ended up getting robbed by some piece of crap dog shit broker. So the regulations on accounts ended up costing me and alot of other traders hundreds of thousands of dollars.
Let me try...actually it was pretty well explained (not by me) in a different thread. If your 3 buys were in cash and less than 24 k is..no margin used....and sold same day you are ok . BUT...you now have to wait for settlement to buy again, or you have either used margin (and into PDT territory)or violated free ride provisions. One interesting work around is options (with all their nuances), settle next day, so your 24k is good to go the next day.