Stock and options trading in the U. The SEC defines a pattern day trader as anyone who executes more than three day trades in a margin account over a five day period.
This does not apply however if the number of day trades is not more than six percent of the total number of trades over that five day period. This amount it should be noted has not been modified since the rule was initially issued.
If he cannot do that then he will not be allowed to day trade for 90 days or until he has the required funds in his account. The purpose of the pattern day trader rule is to protect individual traders from overexposing themselves to the dangers of day trading by severely restricting the number of day trades they can take in a small margin account.
Whether or not the pattern day trader rule has helped reduce risk for individual traders is hard to judge or at least quantify. While it has probably kept traders with very small accounts out of the stock market, many of them will likely have moved over to spot forex trading which is much less regulated than either stocks or futures and other derivatives.
Even those seeking to trade in well regulated markets have an alternative to stocks in the form of futures trading which provides even greater amounts of leverage than stocks. As a stock trader of course you still have alternatives. You can also switch to swing trading, either swing trading the stocks directly or swing trading options for much greater leverage and much more limited down side risk.
Regardless of the direction you choose, be aware of the rules and regulations governing your account so that you are not caught unawares and penalized. Call Us - or Day trades are trades executed and closed within a single trading session. A trade that is opened today and closed tomorrow is therefore not included in this definition and any swing trader, even one who trades short duration swing trades, should not be impacted.
It is of course possible that a swing trader with a large number of open positions may be forced to close several in the same day as the result of an unexpected news event and thereby trigger the rule.
The rule only applies to margin accounts. As long as he has sufficient funds in his account to buy the stock, then he can day trade as often as he likes. If the number of day trades is not more than six percent of the total trading activity then the rule does not apply.
That would mean that if the trader had executed a total of fifty trades over the five day period and three of those trades were day trades, then the rule would not apply because the total number of day trades was not more than six percent of the total number of trades. The rule applies to stocks and options. Futures and forex trading are not regulated by the SEC and therefore are not subject to the pattern day trader rule.
Good luck in your trading. Testimonials I love the Premier Trader University program. I was at the point where I needed to change the amount of time I was spending in front of my computer trading because I was exhausted caring for an elderly family member plus working at a part-time job. Overall I have been very happy, Premier Trader University is a first class product. I really like the methodology, tools, etc.
The Pre-reqs were excellent — well packaged and presented. I have a good deal of trading experience and I learned a lot from the Pre-req videos.
I also thought the Undergrad training was excellent, doing a great job balancing the wide variety of experience levels of traders on the … Paul H. I am very pleased with the PTU approach. I found the material and presentations very complete. It is organized such that it can be referenced and found easily. My objective is consistent daily profits. Therefore, the one thing I am looking for is a way to control the losses such that these consistent profits are possible, and I am close to completing that as… Frank M.
Reading recommended books and studying options. I wish the PTU had been available when I first starting trying to trade. It would have saved me a lot of time and money. One might say if they work why do I keep purchasing them and I say, Because they work. As any traders know we are always looking for the edge and PTU delivers on it The whole process of understanding How to trade are just as important os the mechanics of actually plac… Jim Turner, Illinois United States.
The PTU undergrad course work was fantastic, thoroughly put together and super informative. I was impressed with the professional way in which your team presented the information. Actually, I was vacationing in NY when the classes started. On returning home to FL, I purchased and set up a new trading computer system.
Started reviewing the training and TraneStation videos. Will was so kind to help me download t… http: Looking forward to the start of a new adventure trading Futures.
Just wanted to say thanks. Chas Lee United States. I have not been this excited about trading in a long time. This has been the best decision I have ever made concerning trading. I know that seems hard to believe but my trading account believes it.
Email Us Tel No:More...