Getting around PDT rules

Discussion in 'Trading' started by futuretrade, Aug 8, 2003.

  1. Here is a scenario I thought of. I am not claiming to be the first to think of this, only that I haven't heard of this elsewhere.

    PDT is enforced individually at each brokerage. Within any 5 day period, you can only make 3 round trip day trades without being shut down as a day trader, if your account is below 25K.

    So here is my solution. Don't open a single account with 10 or 15K. You're only screwing yourself by limiting yourself to three trades weekly.

    Instead open up 5 different accounts with different brokerages. I don't know something like IB, Datek(yeah, it can be expensive), whatever, just something reasonably cheap. Keep the minimum in there, or better yet find an account that has no minimum after the initial.

    Each account is for a day. Your IB Account might be your Monday account. Your Datek account could be your Tuesday account. Somwhere else, wednesday, etc.

    The point is, you can now make 3 round trips per day/15 per week. I know this is a lot of work, but for some people it might be worth it. The futures markets are expensive places to learn.

    Does this sound like it would work?
  2. I'm not sure if it would be legal, but from a pragmatic standpoint, you would likely not have enough money in each account to buy the number of shares of stocks you would want. In other words, you'd be limited to probably one position at a time per account given that you'd be dividing your $15,000 by 5 (or whatever amount).
  3. Ebo


    You have got to be kidding.
    What are going to do trade 10 shares in each account?
    What kind of glue are you sniffing?
  4. Your position size would be too small on each trade to actually profit from this. How about you just trade Futures?

  5. Funny... three overlapping replies within three minutes all saying pretty much the same thing.
  6. I used to have 2 accounts at the same firm and would switch my funds in the other one when I had exhausted my 3 daytrades. Then I went on a trip and left one of the account empty. Next thing I knew the SOB's had closed it. But yeah you can trade in 3 $5000 accounts. But hey you know what? the PDT is great after all. Thank God there are plenty of other things to do than daytrading stocks. I wouldn't know that if it weren't for these nice NASD folks always there to protect the little guy.
  7. JT47319



    No PDT. No uptick rule.
  8. Lets assume each account is 3000. With margin, you can buy close to 6000 dollars on each trade. Assuming that a stock costs around 20, that's 300 shares, 30x more than 10.

    If you can get 10 cents a trade, (not a scalp) you'd be looking at 90 gross per day, not bad for someone starting out. WIth a little bit of luck and volatility, maybe even 125 or 150 a day.

    Of course a new person wouldn't be that lucky.
    My point was you might be able to average 50-75 per day, 250-350 per week and not the 50-75 per day.

    I think it would work. Just offering my suggestions.
  9. The problem with eminis for the new person is leverage and spread. Assuming a newbie is going to try futures, assume they pay the spread each way. That's 25 dollars lost right there. 4.80 commission. Newbies done 30 already. That'a a pretty step learnign curve to overcome.

    I think a newbie would be much better off hitting the SPY's or the QQQ's to learn, while they build up their account.

  10. DeepC


    Wouldn't getting on with a prop firm be the easiest way around the PDT requirements??

    Seems to be several out there that will take 5k to 10k giving 10 to 1 leverage, and allow you to trade remotely without a license.
    #10     Aug 8, 2003