Newbie question - $25K limit

Discussion in 'Trading' started by birdie, Mar 29, 2002.

  1. birdie


    OK, here goes...with much fear and trembling, I am losing my virginity and posting here for the first time. I won't even beg y'all not to flame me...I can take my medicine like a man.

    I have not started daytrading yet - have been studying on and off since 1998 and, being between consulting gigs at the moment, plan to begin trading in the next couple of weeks.

    I don't have $25K of risk capital, so I can't actively day trade on margin. My question is this - is there anything to stop me from day trading strictly on a cash basis (no margin, no shorting, etc?) Ideally I'd like to start with $10K or so, and actively trade 100-share lots of $20-$50 stocks. Is there any reason why I can't do an unlimited number of long, non-margin trades on this basis? Thanks much...

  2. Banjo


    In a cash account you can daytrade as long as the aggregate money traded doesn't exceed the money in the account. Number of trades doesn't matter. You can also open an margin account so that you can short and just trade the cash amount. In other words you have a margin accnt. restricted to trading the cash in the accnt because it's under 25k but because it is a margin accnt you can short.

    You need to pick your broker carefully as clearing firms choose to impose differing rules on client brokers. Cyber (Penson clearing) or IB(timberhill clearing) will let you open an margin acct. and complete 3 daytrades in 5 biz. days using 2x margin as opposed to 4x for above 25k accounts.
  3. So if you have $10,000 in a cash account,and make a $10,000 purchase, are you saying you can't make any more trades that day,including liquidating your position?
  4. AFAIK, the rules (or brokers) never prevent you from liquidating any position.
  5. Banjo


    of course you can liquidate. A daytrade is a round trip short or long.
  6. You can always liquidate, but circumstances could arise in which a swing trader who is flirting with the PD designation could enter an intended multi-day trade and be in a situation where his stop is hit that same day. If he liquidates it the same day and has made day trades in the previous few days, it could be the final day trade to push him into PD territory.
  7. Banjo


    Correct, that's why IB's software won't let a 4th trade be opened untill 5 days have passed from the day of the first daytrade.
  8. Birdie,have you thought about trading with a professional firm such as Echo? Their minimum is $10,000,10 to 1 leverage,and you can trade as often as you want. Professional traders are not subject to the PDT(pattern daytrader)rules. You just need to pass the series 7 exam.Their website is...
  9. Birdie,
    Most online broker require you to have $30k to start.
    If you look at PointDirex or Tradestation, both require min $30k to start.

    Other option is to take a series 7 license and join a pro firm.
    #10     Mar 29, 2002