Coughing up the $25k requirement for Pattern Day Trading

Discussion in 'Professional Trading' started by AeroKen83, Mar 16, 2006.

  1. Hi,
    I wanted to begin trading with NASDAQ and NYSE markets using Interactive Brokers. I am a pattern day trader, and the stupid NASD rule about having a minimum of $25,000 of equity in an account is too much for me to produce.
    Is there anyway around it, like going into a margin account or something? (Legally)

    I'm sure others have had the same problem.

  2. MTE


    Margin account won't help you, the rule still applies.

    Futures trading is an alternative.
  3. there are many prop shops were you can put up as example $5000.00 and daytrade without the PDT rule. some of these firms offer 10/1 leverage and more. perhaps someone here can direct you specifically better than i can.

    good luck,
  4. Warning, warning, warning.....due to the decline of the prop business past 5 years, Prop shop rates are actually HIGHER than retail !!! Couple this fact with a choppy or trendless market along with the pressure-to-trade and it is easy to see how many "blow-ups" I've witnessed in the past 2 years. Of sure, if you are already a proven and experienced trader, you'll get a decent rate....but starting out ? Forget better be damn good, or else you'll be "toast" very quickly.

    Another alternative: swing trading options with 5-10 day holding period.
  5. lakka


  6. zdreg


    the rule is not stupid. it keeps out individuals who have no experience in the market and also possibly in life from losing all their assets.
  7. traderob


    Not sure I follow the logic. Say someone has $20,000 to spare plus a couple of credit cards, then they can daytrade stocks. They might lose all their savings - most do.

    Whereas if the entry level was, say, $1000 (like with futures, forex, poker, horse racing, sports betting, etc, etc) then said individual can put in a small portion of his savings and not be so financially damaged.

    I could see if they set the entry at $1,000,000 that that would deter almost everyone, but most people can rake up $25,000 without too much trouble.
  8. zdreg


    i suggest you reread various threads on this subject. it seems that $25000 for whatever reason is an insurmountable barrier to many posters.
  9. Ebo


    You got that right ZD!
    Maybe if they refinance The Doublewide they could come up with 10 Grand. It does make you wonder why this topic gets beaten to death on here.

  10. You are right, the individual allowed to day trade with $1,000 will not be financially damaged but the broker will eating the loss from the day-trader who blows up more frequently.

    The PDT rule is good in that it makes sure someone is adequately capitalized before day-trading. Someone who needs to put money on credit cards or borrow to get to $25K should not be day trading anyway in a retail account. If a prop wants to give them 40:1 leverage on $1,000 then I would avoid that prop.

    In day trading your loss is not limited to what you put in so lowering the requirement does not mean less risk of loss for the trader, it means more risk of loss for the broker. $1,000 loss is not as significant for a $25K account and it does happen so imagien letting newbies in with $1k.

    #10     Mar 16, 2006