Is this legal?

Discussion in 'Trading' started by tracker, Dec 13, 2001.

  1. tracker

    tracker

    Can I open two accounts for $5000 each. Trading only QQQ, open a trade in one account then when I'm ready to get out I offset it in the other the same day. Trading only 100 shares at a time ( I'm in learning mode) this would allow me two trades the first day. The next day depending on whether I wanted to go long or short I would close one of the positions. Doing this I could do two trades a day for ten trades a week which would give me a lot more experience than 3. Since its the QQQ there is no uptick rule so I would not be circumventing this rule. Would appreciate any input.
     
  2. It sounds like you want practice "clicking" the mouse. What possible benefit could there be to doing this? It's kind of like betting on both football teams in the Super Bowl, you would lose, but not that much (the commissions).

    I don't think that it is illegal, but just kind of a waste of time and money, since instead of being "flat" you would have 2 "open" positions subject to margin interest.

    You may want to re-think this.
     
  3. Mr. Bright, I believe more than anything else, he's trying to circumvent the pattern daytrading rule for under 25k accounts. Good for him if he can pull it off.
     
  4. Mr. Bright

    I appreciate your input. I have been making money, on paper, for several weeks now primarily catching the first and second move of the QQQ. Two trades a day. The gains are small but consistent.
    Trading only a hundred shares I wont make much but I don't have a lot of choice. I do not want to trade the mini contracts as I dont have enough money. Do you know of a better alternative?
     
  5. Tracker,

    An interesting question. Don't know the answer to the question of legality, however, first of all you can do three day trades in a week (purchase and sale of the same security on the same day,) not 'trades.' Looking at it from the point of view of trying to maximize your profit, I'm not sure if trading the QQQ at 1:1 margin 6 times (round trips) would be much better than day trading 3 times at 2:1 margin.

    Also in your case it would probably be better to just trade the futures, with 10,000 you can trade the NQ at 3:1 margin (or higher.) Of course the day trading rules do not apply to futures.

    voodoo
     
  6. trdrmac

    trdrmac

    Tracker,

    I would think the simple solution to this would be to open the accounts at two separate brokers. My guess is that internal auditors at one broker would pick up on what you are doing and flag your account. The firm may risk problems if they are not in compliance with the pattern day trading rules.

    Additionally, I agree with Mr Bright in that you may just be wasting money without more of a strategy. For instance, you could take a small long position in say CSCO, INTC and MSFT and then hedge the position with some QQQ short. This is NOT what I am saying that you SHOULD do, and you would have to work out the details of the Hedge for yourself, but you may find it a little more workable.

    Best of Luck