Please advise me! After completing my studies and gaining some experience paper trading, I plan on opening a small day trading account. My funds are somewhat limited and although I have the $25k to put into a margin account, I didn't want to tie up that much of my savings. I would be more comfortable with a $10k account, but the problem is the pattern day trader regulation. It seems to get around that, I would have to have a cash account. In that case I wouldn't be able to short sell and I would have to make sure there is enough settled cash in the account to make a trade, which could impede the frequency of my trading. I only plan on risking 1% of my account on any given trade, so I'll be starting off small and perhaps I won't be buying enough to be affected by the cash settlement rules. I want to trade enough to qualify as a trader (TTS) by the IRS so I can receive some tax benefits. I suppose this would mean at least one trade every day of the week. Any suggestions and recommendations would be greatly appreciated.
Just put the 25k in. Set an amount where your done. Feel free to drop below 1% risk even. That’s a good rule for trading but learning to trade drop it as low as you can before fees are just gobbling you up while you learn.
You would have to have 4 trades per day or 720 traders per year - as one set of criteria, in order to qualify for TTS. More info at greentradertax.com
Just my own 2 cents: swing trade, don't day trade. I know that is not a popular opinion with many, but I am being sincere. And it will be much easier on you if you have a steady income stream doing something other than trading. You'll make better trading decisions if you are not forcing trades. I speak from experience. I worked as an Engineer for three years while I leased a seat at the Chicago Board of Trade and traded. When I was at DE Trading in Glenview, I sat next to a guy who traded the Eurex Schatz. And he sold athletic shoes in the evenings for a couple of years as well. And then one day he started driving a BMW M Series and then several months later had a boat moored at Marina Towers. I wish you good fortune !
Thanks for the response. My biggest worry with swing trading is the possibility of big losses due to premarket gaps. On one hand it seems a bit less stressful than day trading as you have more time to analyze potential trades, but on the other hand I don't want to be biting my nails every night praying for the stock to move in my direction and not to gap the other way. I like the idea of getting in and out quickly.
Are you going to be relying upon your trading and your trading account equity to pay bills and living expenses?
With swing trading, you start out with the smallest increment of risk you can. 100 shares of stock, micro futures, future spreads are good candidates. The important part is to not have any emotional anxiety about having on an open position. Once you have proven to yourself that you can take money out of the markets over a protracted period of time, then it is very easy to lever up. I've been contacted over the years by quite a few new traders who got absolutely savaged trying to day trade. The bots, the algos, the HF hasn't made it easier for them. If you can program and you have a good strategy and a great ECN then maybe you stand a chance with an automated trading system. But a newbie with a mouse in his hand staring at an electronic order book is shit risk/reward TBH. I wish you good fortune!
i'll let you in a little dirty secret...it is far easier to make money if you have more money. i'm talking about 5-6 figures trading account vs your average robinhood 3 figures account. save some money until you have 5-6 figures account size. and in the meantime, do paper trade with your with your 5-6 figures for at least a year with your trading journal.
i can tell you my experience i took one year to figure the market out..........that was the easy part. i took 20 years to figure myself out that is the reason all trading education fails. you can day trade futures to get around day trading restrictions cant you?