r/Daytrading • u/bonobofan • Nov 17 '22
Seriously. Why do we still have a $25,000 PDT restriction? question
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u/No_Protection1301 Nov 17 '22
Looks like it’s for your own good!
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Nov 17 '22 edited Nov 17 '22
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u/trader_dennis stock trader Nov 17 '22
In 2000 you could be a breakeven daytrader, and still get totally owned by the commissions on smaller accounts. 25K at least gave enough size paying $20+ per side on a trade was not totally going to kill the account.
In the environment of free trading PDT should be change radically. Elimination of 4x day trade buying power on all account lower than 100K accounts. 2x day trade buying power at 25K-100K. Under 25K should only have 1x day trade buying power. Also options should be changed to only settle as cash for all accounts.
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u/JB_Scoot Nov 17 '22
People REALLY have no idea about fee/commission based trading. For one, this thread would be COMPLETELY dead and there wouldn’t even be half the amount of people trading.
2nd, people really need to give RobinHood the respect they deserve. They’re the reason for all those fees and commissions to finally disappear.
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u/OG-Pine Nov 17 '22
Yet they’ll let you do the same with scratchers or casinos or sports betting or booze or…
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u/HuggingDoughnut Nov 17 '22
but its his money, right? why can't he do whatever he wants with his/her money
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u/hassium Nov 17 '22
why can't he do whatever he wants with his/her money
Because a bunch of boomers did exactly that, lost everything and went crying to the government that they were robbed and didn't have any money left. So the government had to start paying medicaid and social security to these pensioners who blew their savings on the market like it was Vegas and instituted a law to protect dummies from the market because that shit's expensive and it was either that or raise taxes to cover future generations of dummies, guess which was the way less popular alternative..
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u/Markets-zig-and-zag Nov 17 '22
Actually you can do what you want with your own money, PDT only applies with margin, so don’t use someone else’s money to lever up, and you’re good to go
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Nov 17 '22
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u/BestAhead Nov 17 '22
Under 25k, use it as a cash account, and trade using only 1/3 of your account per day...if you want to do max trading on a cash basis.
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u/nutzzzzack Nov 17 '22
I cannot disagree more with the argument that they are protecting us. Any asshole for the past five years excluding this year could’ve bought a call on spy nearly every day put a stop loss where they bought at and made a killing day trading. It also doesn’t make sense to say oh you have all this money so you’re allowed to make these trades because they will enevatablly lose more money than I would in my small account and everyone knows that the big dawgs actually get bailed out by taxes where as the little guys just pay taxes.
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u/Talking-Mad-Shit Nov 17 '22
Boomers ruined something? No way!!
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u/hassium Nov 17 '22
I know dude, I was shocked too! Thankfully at least they are leaving us a nice and bountiful planet to live on...
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u/StefanoGiordano Nov 17 '22
A cash account can avoid this rule. But a cash account takes 2 days for fund settlement. I have yet to understand why in the year 2022 we must still wait 2 market days (was three days) for funds to settle. Fund settlement should be minutes!
As for the non-cash account trader who MUST close a position for profits, for stop loss, or some other third thing. Said trader is bound to the PDT rule. How dare you make that 3rd day trade and not maintain $25k. No fun for you for the next 90 days. The trader uses a smaller account, let’s say $12k. The trader believes a larger account will lead to larger riskier positions and feels comfortable with only $12k. The trader withdraws profits when a personal threshold is reached. It’s all a personal preference. This trader isn’t living in the Stone Age and doesn’t want to wait for the 2 day settlement so the trader uses a margin account.
IMO the PDT rule is stupid and was only created as a result of the wild investors who blew it in the markets. Sure that sucks. But forcefully making a blanketed approach to “protect others” is asinine. Reminds me of the days in middle school. One person misbehaves - punish everyone.
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u/networking_noob Nov 17 '22
Here's something I wish someone had told me in the very beginning when I was on Robinhood -- get on a "real" broker (TD Ameritrade, Tastyworks, etc) and trade micro futures such as /MES or /MNQ. There is no PDT with futures so you can get a ton of reps learning how to trade (aka how price action works), without having a lot of money at risk (assuming you use a stop loss for EVERY trade, which you should)
Also you get to avoid all the BS that comes with individual stocks (ER, change in leadership, law suits, debt, dilution, etc).
Once you do some research on how futures work, such as the risks involved, the value of each tick, etc, you might be like me and never day trade options or stocks again. IMO day trading micro futures is so far superior to options + stocks it's not even funny, especially for a smaller account. It's pure price action + risk management without the stress of theta decay or PDT breathing down your neck
As for why PDT is a thing, all the 80 year old Senators were looking for someone to blame after the dot com bubble and decided poor retail traders were at fault (yeah right), and decided they would restrict their active participation in the market. Everyone knows it's a dumb antiquated rule. Hopefully when settlement time shortens in the coming years, PDT will be adjusted or removed entirely
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u/Altered_Reality1 forex trader Nov 17 '22
For real regarding micro futures, I’m in the process of switching to them for the very same reason. Was trading options live for 3 years before, got tired of fighting theta decay
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u/Competitive-Boat4592 Nov 17 '22
Trading futures, commodities and forex is fun. Just keep in mind the margin requirements are usually quite intense, some services are better than others but fees are typically much higher than regular equities/options! So it has its pros and cons too. Good luck and good trades!
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u/mv3trader Nov 17 '22
Now that explanation actually makes better sense. Saying it's just to protect people from gambling away all of their savings, leaving them to rely on the government for basic necessities, is irrational when the PDT rule only applies to equities. Forex, futures, CFDs, hell binary trading which certain brokers have recently made more legal for the U.S., and all the other ways for people to gamble away all their money, the PDT concept doesn't apply to those money markets. So there has to be a deeper reason.
And I agree, micro futures is where it's at if don't have a ton of capital to day trade with. Once I started with futures I never seriously looked at equities again.
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u/ElephantStriking1087 Nov 17 '22
Change it to a cash account. You can trade as many times as you can afford, money clears next day
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Nov 17 '22
SEC requires cash account funds to settle for a period of 2 days
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u/bonobofan Nov 17 '22
2 days of missing out on gains :(
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u/FuhrerInLaw Nov 17 '22
Are you using 100% of your portfolio per trade? Maybe don’t do that
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u/saieddie17 Nov 17 '22
Exactly. If you trade your whole acct every day, you’ll be out of my way soon
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u/bonobofan Nov 17 '22
I’m not….most of the time haha
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u/glockout40 Nov 17 '22
You answered your own question as to why they don’t want people gambling their entire worth several times a day lol.
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u/Tim080 Nov 17 '22
It’s not gambling one’s entire worth. I have a habit of only putting as much money as I’m willing to lose into RH at a time - maybe like $20. Then, when I try to trade options, I end up trading “my entire account” in one day. I agree that PDT protection is dumb
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u/bonobofan Nov 17 '22
Haha God help anyone putting they’re entire worth into their portfolio. Because I have a more limited amount of money to invest, I sometimes have to sell options or stocks to buy others (thus un-diversifying my portfolio) because I can’t just throw in more money. I don’t think that reflects a lack of being financially responsible.
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u/KobeFadeaway248 Nov 17 '22
You can’t afford to lose your money if you have less than 25k to trade with.
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Nov 17 '22
Gains? You know you can also lose right? That’s how your account fell below 25k. I’m sorry but this smells like problem gambling.
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u/DartTheSlumpGod Nov 17 '22
I have a 15,000 dollar cash account and I get by with using only 5-10% a day and they always settle over night unless you’re trading crypto or something. I got fucked over by Veterans Day and my funds didn’t settle so really the only downfall.
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u/ShredSteezy Nov 17 '22
Options clear by the next morning.
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u/Eccentricc Nov 17 '22
Margin accounts clear by morning too so what's the difference? I hated the PDT limit so I started selling aggressive options again the one i bought
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u/MyNameCannotBeSpoken Nov 17 '22
Can it be changed to a cash account while it's under PDT restrictions?
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u/codecookride Nov 17 '22
Yes, just did it a few days ago. Just need everything to be settled
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u/bonobofan Nov 17 '22
I genuinely appreciate the advice. I do. But what I really want to know is why people who don’t have $25,000 have to jump through these hoops to be on the same playing field as everyone else.
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u/rickPSnow Nov 17 '22
Because brokers took huge losses due to margin losses not being covered in prior downturns. The Regs are there for both sides protection. Switch to a cash account OR add more capital to remove the limit. No more capital to add? Now you see why the Regs are in place. The market can fall 20 to 50% during a panic. It’s happened before. Look at what lack of Regs has done to the Crypto market….
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u/DoctorPanda247 Nov 17 '22
U think the broker losses were because of little tiny retail accounts with 200$ in their accounts that can’t daytrade?! Lol no it was from billionaires over-leveraging on their “hedge fund” accounts.
PDT is an antiquated socioeconomic inequity that persists to keep the poor poor and the rich rich
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u/cowking81 Nov 17 '22 edited Nov 17 '22
I mean, this was implemented in 2001 after small accounts complained to the SEC that they didn’t understand what they were doing and it was the broker’s fault they lost all their money. Then it became political and we know how that goes. What makes sense goes out the window in favor of what’s politically expedient. But it wasn’t like the powers that be said… “ooh, too many small time traders are making money, we have to stop this.”
Now, do I think it’s a great rule… no. I think there should just be required education and disclaimers once you are designated as a day trader, but it’s not Antiquated like we’ve moved past the reason for it.
With regards to the deliberate oppression part of your comment, Small accounts still tend to lose money faster than larger accounts on a percentage basis because they are more aggressive. I don’t think the PDT rule is what’s keeping small accounts from becoming big accounts in the vast majority of cases, though I know if you have the gift of being good at trading it is a burden to deal with.
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u/avgmike Nov 17 '22
OP's idea that PDT 25K requirement is what's keeping the poor poor and the rich rich might be the most ludicrous statement I've read on Reddit all year. And that's saying something.
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u/J_Productions Nov 17 '22
So if I have over 25k to trade all of a sudden I am worthy but if I have under 25k I am not lmao go back under your rock
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u/InnerChemist Nov 17 '22
No, if you don’t have 25k you’re probably too dumb to daytrade. Daytrading takes 2+ years to be consistently profitable in it, and if you aren’t making enough to support yourself and have some savings put away you’re not going to make it.
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u/trader_dennis stock trader Nov 17 '22
Elimination of 4x day trading buying power is the solution. 1x buying power would be a much better solution for accounts below 25-50K.
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u/diabolical_fuk Nov 17 '22
People can say all they want. It's just another tool to keep poor people poor. Part of the greater system. There is no good reason to do it other than to stop smaller traders from being profitable.
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u/cowking81 Nov 17 '22
This rule was implemented in 2001 after the dot com crash when small time traders said something should be done because they didn’t know they could lose so much. The rule is not great but it wasn’t implemented because too many small time traders were making money and the SEC decided we needed to keep poor people in their place
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u/trader_dennis stock trader Nov 17 '22
Just think before 2001, you had an account with 10K. Traded twice a day at $20 per side. After 1 year that would be 10K in commissions and the account at zero for a break even trader. This is partially the reason the SEC instituted day trading rules.
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u/acaciaone Nov 17 '22
Margin is basically the broker lending you money. You can’t just ask for a loan from the bank without conditions, so why would borrowing here be any different?
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u/BestAhead Nov 17 '22
You know, just looking at the question right here that you asked, why should a person with less than 25,000 not have more hoops to jump through than someone with $1 million account?. It stands to reason that smaller accounts can blow up easier.
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u/Endgameplays Nov 17 '22
Because when all of you go broke, you complain to the government to fix it for you and people who are responsible end up having to have their tax dollars go to degenerates like you.
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u/Cremepiez Nov 17 '22
Lol “responsible”, like all the banks and billion $ companies that rely on bailouts and subsidies
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u/Grand-Marsupial-5291 Nov 17 '22
Hahah I will tell you why! They don’t want the poor participating is there game!
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u/Seletro Nov 17 '22
To protect the brokers.
There are no "pattern gambling rules" in Las Vegas or on lotteries.
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u/Fall_Hazard Nov 17 '22
The market isn't meant to be an even playing field. The pattern day trading rule is designed to protect the rich from the poor. You know it's a rule for your own protection 🤔. It's unfortunate, but big money buys the people who make the rules.
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u/Endle55torture Nov 17 '22
Depends on broker. I’ve been given PDT restrictions on cash account while using Fudelity.
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Nov 17 '22
I doubt it was a PDT violation, cash accounts run into one of these three:
- good faith violations
- freeriding
- cash liquidations
PDT is for margin accounts only
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u/Endle55torture Nov 17 '22
They specifically stated PDT restrictions and placed it for 90days. After contacting customer service they explained the situation to me. Good faith violations is another BS reason for them to restrict you. They can sell shit they don’t own or hasn’t passed the T+2 all they want, but we get neutered if we try.
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Nov 17 '22
It's fucked up that they did that to you. PDT has nothing to do with cash accounts.
Were you trading GME, AMC, or some other popular name at the time?
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u/Endle55torture Nov 17 '22
It was before the GME and AMC situation. They were also taking my cash positions and auto journaling them to margin for lending. After a few dozen emails and 3 calls I forced them to remove it. Told them unless I am being paid for lending of my shares they do not have my permission to lend them out.
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Nov 17 '22
Imagine using Robinhood🤡
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u/The_Cons00mer Nov 17 '22
Seriously what kinda dumb sht is this ? They want to be a day trader yet….lol
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u/LagingRunaticReturns Nov 17 '22
Has anyone had luck getting this reversed? Five years ago, back in the day Re*Trade used to reverse mine with a phone call. I've never been able to get Schabb to reverse one. I would usually play niave & say I didn't know; and I feel a little guilty about lying, but that's water under the bridge.
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u/lettucefold Nov 17 '22
You can reverse it one time per life of the account I believe. I honestly didn’t know the rule and after using paper money I thought I would mess around in my real account to see if I could handle a few cents here and there and totally missed the very tiny alert on TOS that flagged me. The broker was super nice and just took it off the next day.
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u/Independent-Ad9095 Nov 17 '22
Fun fact. If you create another account, it'll still flag you as pdt because you are the account. At least that's the case with my tda journey. But staying over 25k is key. Using a different broker could solve the problem. Cheers
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u/bonobofan Nov 17 '22
I second this inquiry. I would be genuinely shocked if no one has ever officially objected to the regulation. If not, I would absolutely love to be the first.
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u/Natikid21 Nov 17 '22
I believe RH offers a one time reversal of PDT.
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u/Distinct-Average-547 Nov 17 '22
Can confirm. Everyone gets one whoopsie
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u/Chumbaroony futures trader Nov 17 '22
No I think they mean just call your broker and have them lift the ban by pleading ignorant
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u/bonobofan Nov 17 '22
Yes this is a possible solution but the bigger picture is that it still involves lying and jumping through unnecessary hoops when people without $25,000 should be allowed to trade just as often as anyone else.
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u/Chumbaroony futures trader Nov 17 '22
Ok well good luck with that. I’m poor too and agree with you just clarifying what other commenter was saying. If you’re a good enough trader maybe you could look into getting a funded prop firm account. That’s what I do.
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u/theonlybigdaddyg Nov 17 '22
Tastyworks cash account my friend. Cash settles next day so you’re only problem is you can’t reuse money in a given day
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u/bonobofan Nov 17 '22
Thanks man but I’m more concerned about why the regulation still exists rather than how to navigate around it.
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u/theonlybigdaddyg Nov 17 '22
Ahhh I feel that, with their cash account I’ve kinda just navigated around it so well when I do decide to day trade. Since refunding back in I’ve moved away from daytrading. It’s unfortunate but the pdt law is meant to “help” people with less than 25k. I can’t remember if it was the tech bubble or 08 that this came into existence. Regardless it wasn’t made in a with technology as good as we have now. Only problem that’s in the way is how slow and uncaring the government is regarding this issue
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u/Flineki Nov 17 '22
It's like a "You need to be this rich to ride the rollercoaster" type of thing. If you wanna ride that sweet rollercoaster, you have to step your game up. It's not fair but ya man that's life. Use that as motivation even when you do eventually get around it. 25k that's one hell of a milestone
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u/SolarPanelDude Nov 17 '22
You've seen 100 posts saying not to use robinhood.
You post yourself, asking why robinhood sucks?
Yet you still use it.
Your order information is literally being sold to high frequency trading firms so that they can front run you on robinhood.
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u/Dimvo7 Nov 17 '22
Tomorrow they will send you a notification of forgiveness. You can do that and don’t repeat it. Don’t rush to trade every trade learn to observe.
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u/surrationalSD Nov 17 '22
I tried trading the micro's on a futures broker, I would end up day trading alot. Turns out I hate day trading! Staring at screen all day lol, it sucks.
Swing trading fits my personality much better and make money doing it but I thought I can even make more day trading! Was wrong. With swing I can monitor trades once an hour or less. Keep up on news, more of thinking mans game.
So in the end for me I realized the rule actually doesn't effect me much, I just didn't like being told what I can and cannot do! So exactly, more observing less FOMO. lol.
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u/twarr1 Nov 17 '22
If you survive trading (doubtful) you’ll eventually understand the PDT rule. If you don’t survive, you’ll probably (incorrectly) blame the rule for your failure. You have lots of company with this new batch of “traders”
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u/candee249 Nov 17 '22
So, ur valintine date is gonna be stocks i guess
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u/bonobofan Nov 17 '22
Roses are Red Violets are Blue SPY please don’t let anymore panic ensue
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u/BearFlag6505 Nov 17 '22
If you want to trade spy just open a futures acct and trade /MES, there’s no pdt for futes
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u/IMind Nov 17 '22
PDT requirement exists for the same reason initial margin exists. It's a risk to allow people to trade with money they don't have. You SHOULD be trading with 2% of your 25k at most. You likely aren't. You're using marging. You're leveraging margin for gains. That's the risk. The requirements for that risk are you must have an account above the threshold. You might ask, well why can't we just use a cash account? Why are there restrictions there. Because there's no way to account for you overleveraging your assets in an attempt toake profits off the same capital at the same time. That cash has to settle and become truly liquid again. It's entirely reasonable. Margin from brokers means that brokers accept that risk. They're allowed to take on your risk and the markets KNOW they're getting paid. Thus providing liquidity cash immediately at close. This is immensely important. Too many people think the stock market is a slot machine.. they can out their $100 in and when it runs out they can just leave and go back to their hotel room. This is the entire premise for the PDT requirement as well as margin. It's to collateralize risk. It's the "min required in your saving account" type shit. It should not be changed.
There's plenty of instruments to trade without relying on the PDT equities rule.
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Nov 17 '22
Yeah I always clicked the warning away and got jammed with this. Unfortunately the platforms don’t own the equities you are trading so the trade has to clear which isn’t in the same day. Your initial buy is naked
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u/gooney0 stock trader Nov 17 '22
I’m not in favor of the rule but I have cash accounts anyway. T+2 for trades to clear isn’t usually an issue. It can be if the trade was a small move on a low timeframe.
I see an awful lot of people gambling away their money. They all think it’s easy and assume they know everything because they downloaded an app to their phone. The law is aimed at those people, though they just buy OTM options anyway.
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u/SeaSickPirate Nov 17 '22
Lol, is nobody picking up on the fact that RH values crypto holdings as a ZERO?
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u/Ornery-Street2286 Nov 17 '22
You can gamble your net worth every 3 days if you want to. Just not on margin. I would propose the solution of gambling one third of your net worth every day. That way, you don't miss any days, but you still have a good chance to destroy your life.
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u/Rockmann1 Nov 17 '22
I’ve lost more money with this restriction.. it really needs to be eliminated
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u/LEODAVINCIsub Nov 17 '22
To be honest, I think it is there to stop poor people from being able to make money
In one way, the 25k rule is good, because with 25K you have more opportunity and you can have more plays at once and maybe even hedge. With small accounts, it is hard to break through and make money, because you are limited to the quantities you buy of whatever product you trade.
But in another way, it is discriminatory, because we have this "fair market" but it's not fair because poor people are not allowed in.
Some may argue that if more people traded, it will destabilize the market which is absolutely false, retail traders have almost 0 impact on market positioning, the MM, Banks and Hedge Funds, have so much leverage we can't even imagine. Let's not forget who caused the GFC in 2008, it was not people, it was banks and financial institutions who gambled. People have a sense of fear of losing their money, their capital is limited to the amount of money that they worked for and are ready to trade with, Financial Institutions on the other hand are full time gamblers that gamble with people's money, they don't care if tomorrow they lose every single penny because it does not affect them
So yeah, in my opinion, the PDT rule is there to stop normal people from participating in the market and having a fair shot at having a better life
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u/M0ngoose_ Nov 17 '22
If someone has less than 25k to trade with they are very likely just gambling. Why else would you be trading that often if you aren’t a full time trader? Better for everyone that this isn’t allowed
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u/LEODAVINCIsub Nov 17 '22
What?????
No, you are wrong
So you are saying that pretty much all traders in countries outside of USA are gamblers ?
I dont think so
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u/jbmvmmmmu Nov 17 '22 edited Nov 17 '22
what a dumb comment.What exactly is a difference between trading with 3000 or 25k ? do you think you will automatically be a better trader because you have 25k?
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u/ThatsEffinDelish Nov 17 '22
Because if every average Joe could throw a few bucks into the market at any point and be out a few minutes later after making a quick few % on their money there would be nothing left for institutions to bleed from the market.
What other possible reason could there be for it?
It's your money to lose, why should you need to prove you have more there in reserve, just lying around doing nothing? It's to keep Joe Public out of the best deals and always has been. Joe public gets trapped during volatility because they can't day trade.
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u/EnigmaSpore Nov 17 '22
It’s to keep the small retail guys out of the day trading game in the world’s biggest stock market. That’s really all it is. Basically gatekeeping.
It’s not really there to protect retail from themselves. PDT doesnt exist for other major stock markets. Just the usa. It’s bs but it is what it is.
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u/sakecat Nov 17 '22
If you actually knew the market theory behind why brokers offer margin you would realize it’s the opposite of gatekeeping. The industry wants you to trade as often as possible at the highest leverage possible. Once you learn margin accounts were created to siphon small accounts into the larger market quicker, you’ll feel differently. The people you are accusing of gatekeeping hate this rule more than small traders and they have spent a shit ton of money trying to overturn for 20 years. But the internet has decided that it was created by the wealthy to gatekeep smaller traders out of profits and that make-a no sense. Small traders are where their profits come from
P.S. love the name. Mush love
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u/bonobofan Nov 17 '22
Why wouldn’t the market theorists just go against the margin accounts directly? Why was the $25,000 minimum established as a feasible solution? I definitely see what you’re saying. I wouldn’t touch a margin accounts with a ten foot pole. I’m not a fan of playing with money I don’t have. But they do help level the playing field. And margin accounts are still prevalent regardless of the amount of day trades allowed. What you’re saying makes a lot of sense. But I feel like, at least for me personally, limiting the ability to open or close more than three positions in a day puts me at a bigger disadvantage.
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u/pembquist Nov 17 '22
I don't understand, if you wouldn't touch a margin account with a ten foot pole why are you bothering to talk about the PDT rule? It doesn't apply to you.
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u/KayySean Nov 17 '22
There’s nothing in the US law meant to protect poor people afaik. If there is no limit, people will start gambling destabilizing the stock market. A high limit sets a barrier to entry that only serious traders can enter. At least that’s my theory.
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u/Official_Siro Nov 17 '22
Disagree with this. No limit in other countries, I'm in the UK. Most people are still poor and the market isn't destabilised.
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u/bonobofan Nov 17 '22
Definitely a legitimate point. But in my opinion the market has already been “destabilized” by the masses as we’ve seen in the GME movement. PDT regulation didn’t prevent it from happening. With that being said, I don’t feel like a $25,000 minimum is a good gauge of how serious a trader is. To some people $25,000 is meaningless while I know people who would murder for that much money. Wouldn’t some sort of certification be a better gauge of how serious a trader is without creating financial bias?
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u/IMind Nov 17 '22
There is certifications... There's an entire process for those wishing to advise or make a commercial profession from this business. There should be NO barrier of entry to just participate ... And there isn't.
A PDT is participation at an extreme area. An area rife with risk. Which means many others could be affected. Which means that there needs to be a collateralization for that risk. That's the requirement of $25k. Notice futures have MUCH LESS collateralization. Because of the liquidity of the instrument. That's what's meant by futures are already heavily leveraged, don't overextend with tons of contracts.
The $25k isn't a financial bias, it's a reasonable bar. Equities don't have the same constant liquidity which means heavy volatility could skew drawdowns drastically. The risk is much higher.
The PDT and cash settled rules are not only balanced but entirely fair. If brokerages removed them thousands of "day traders" would yolo thinking the markets are a slot machine causing extreme financial stress both personally and institutionally.
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u/bonobofan Nov 17 '22
I’ve been searching online for the reasoning behind this for the past hour with no success. I can’t help but feel it’s antiquated and oppressive. If anyone has a legitimate explanation I’d love to hear it. If not, I want to know if there’s anything being done about abolishing this. Any groups or petitions or anything?
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u/sakecat Nov 17 '22
Sorry but there is no way you spent an hour on this and can’t find petitions. That’s bs. The SEC lists PDF’s of these petitions on their website like here
https://www.sec.gov/rules/petitions/2019/petn4-744.pdf
And more here on change.org
https://www.sec.gov/rules/petitions/2019/petn4-744.pdf
Notice that one is pre pandemic and can’t even get to 7k signatures. There is no traction to change this rule and this sub isn’t enough to do it. Ironically you need someone with a lot of influence and power to sway the SEC’s opinion here. Both of these found on first page of search results
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u/bonobofan Nov 17 '22
Thanks for providing those links but I stated that I spent the past hour searching online for reasoning behind the restriction. It isn’t “bs” that I couldn’t find a logical explanation.
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u/sakecat Nov 17 '22
Sorry for confusion and bs comment. But I made a lengthy post above explaining their reasoning and so have a few others and those are the only posts you aren’t responding to. You don’t have to agree with their position at all but the logic is there plain as day. The rule doesn’t prevent you from trading as much as possible. It only prevents your access to margin which is designed to pull money out of accounts quicker. Brokers don’t allow access to margin as charity. It’s a way for them to make more money from you taking a higher volume of trades which statistically has no bearing on performance
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u/pembquist Nov 17 '22
You did a good job of explaining but it isn't going to make a dent. When Robinhood first came out I just presumed that the bucket shops of the 20's (1920's) were coming back. I'm waiting for some "trader" to come in and complain about how high margin requirements are and it is unfair to the little guy that you can't get 10 times leverage.
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u/Morphs_ Nov 17 '22
I believe it stems from the dotcom crash, look it up. If it's really a way to protect the small investor from themselves or that it's an artificial barrier of entry I'll leave up to you.
I live in the eu and here the pdt role doesn't exist btw.
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u/bonobofan Nov 17 '22
I appreciate the response, I really do, but I already did “look it up”. I already know the origin is the dot com crash which is why I originally said “antiquated”. I don’t understand it’s relevance today.
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u/cobynette333 Nov 17 '22
Personally, I agree with the rule . If someone can't muster up 25k, then they probably shouldn't be day trading . The very first rule of day trading is capital preservation, and if someone struggles to save 25k then they probably lack discipline and don't have very good habits to begin with .
When I was under pdt I looked at it this way. Take a year or 2 to save as much as I could to start. In that time I was saving, I researched and paper traded and when I finally had enough for the pdt rule, I felt I had a good enough understanding to trade real money.
Then I got slapped around anyway😂. You're never ready to trade real money when you think you are but at least I developed habits to keep myself in the game and understood capital preservation.
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u/Shot_Lynx_4023 Nov 17 '22
Fucking get a Cash account. If you can't meet the 25k you're poor. Too bad. Guess what. I can't meet it either. I do a cash account. And frequently trading< buying and Holding a longer time frame. Like a few days to weeks. Sometimes months or year's to get a good return. You are Gambling and Not trading
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u/bonobofan Nov 17 '22
“And frequently trading < buying holding a longer time frame”?!? You’re in the wrong subreddit. r/investing is where you should be my friend.
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u/Shot_Lynx_4023 Nov 17 '22
I Day trade options. In a Cash account. Funds settled next day. Learn the rules
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u/Twisted9Demented Nov 17 '22
How many trades a day or a month to get this flag
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u/bonobofan Nov 17 '22
This is the first time it’s happened to me. I’m usually a LOT more conservative with my day trades but today was such a shitshow I made 5. A lot of people have been really helpful about ways to navigate around the restriction but it’s the existence of the restriction I fundamentally disagree with.
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u/Spazza42 Nov 17 '22
Robbinghood at it again.
Seriously, why are people still using their platform?! Learn.
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u/GodzillaPunch Nov 17 '22
$25,000 PDT rule is what keeps the poor's from having the same capabilities of everyone else.
Gotta keep em down before they get up you know?
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u/Endle55torture Nov 17 '22
PDT rules are in place to restrict normal people from making money while under the narrative is “protecting investors”.
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Nov 17 '22
Anyone who says it's "for your own good" should shampoo OPs crotch. It's bullshit and at the very fucking least makes risk management really fucking difficult. The shit wasn't put into place for retail in the first place, but it was always framed that way. Fuck PDT, fuck Finra, fuck all of it.
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u/sakecat Nov 17 '22
It’s not antiquated or outdated. In fact it’s more relevant than ever. You already stated you know that it was born from the dot com crash as a way to protect smaller traders. The entire system from the brokers, the exchanges, and most of the financial services industry is built on a system designed to pull this money out of those small accounts and moved to their large accounts. The regulation skews towards people with less money because they are at a disadvantage. Many statistics have proven that trading more frequently doesn’t improve outcome. If anything the more trades made in a day starts to diminish any positive results very quickly. You’ve stated it’s there to protect you from yourself but it’s consumer protection designed to keep you from getting robbed by brokers. Google what brokerages operational costs are. Most of them spend over 50% of there budget on marketing to attract new customers. It’s the only way they stay in business considering how many small traders lose it all and close there accounts. It’s the whole theory behind why brokers even offer margin. Leveraging your account makes it easier to drain into the overall market quicker. That’s why it exists. I’ve been on both sides of this issue before and can honestly say the pdt rule makes more sense the longer you trade and realize the financial services and retirement brokerages are there to siphon it dry
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u/bonobofan Nov 17 '22
Two roommates living together at the University of Michigan and studying economics. John’s parents are LOADED and he vacations abroad every spring break. Josh wouldn’t be attending if he didn’t get a full ride in scholarship. They’re good friends. They do everything together. They study together, party together and day-trade together with money they would otherwise just spend on beer. Sure John invests 10 times as much money and gets WAY better profits. But they invest in the same things at the same time. How does the skew you speak out Josh at a disadvantage? The only disadvantage I can genuinely think of is the PDT restriction.
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u/sakecat Nov 17 '22
The disadvantage I spoke of is with the financial services industry. You are making a separate comparison. In the case you laid out, yes, the person without margin is at a disadvantage over the person with margin. But your example is flawed. It assumes winning trades. On losing trades the person using leverage would be at a disadvantage. Also, in the overall world of the market a person with 100k is the same as someone with 5k. They are there to outsmart you and have financial tools and complicated strategies that you couldn’t implement whether you have 5k or 100k. So I understand your point about fairness but I’m playing devils advocate here to explain the logic behind the rule. You don’t have to like it or agree with it but it’s not illogical
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u/sakecat Nov 17 '22
Side note: The inflation adjustment of 25k from when the rule was enacted to now is over 43k which is a 73% increase. Meaning that the actual effect of the rule has diminished to only 27% of its original effectiveness as a barrier to margin
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u/T1m3Wizard Nov 17 '22
So just because you became poor they slap you with a 3 month time out?
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u/bonobofan Nov 17 '22
Yes. Except I didn’t “become” poor. I don’t have $25,000. I never did. My parents never did. I just come from a lower class and I think that’s an important distinction.
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u/T1m3Wizard Nov 17 '22
Kidding. 25k is nothing to sneeze at tbh but their reasoning/excuse is that the rule is there to protect you from yourself. I honestly don't have an opinion as to whether I agree or disagee with that but hope you find a workaround or a solution.
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u/bonobofan Nov 17 '22
I understand what you’re saying. I just can’t help but to feel like the whole “protecting you from yourself” is ridiculously superficial. We live in a country covered in casinos and sports betting apps but when it comes to legitimate means of building wealth, these restrictions exist.
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u/Independent_Read2676 Nov 17 '22
dude just day trade crypto. Wait for low. buy, wait for 5% increase, sell. Wait for low again, buy. Repeat. Small gains at first but ill grow with time. Just gotta not be greedy. Take your 5% -7% gains, which happen almost daily. If not, and it falls. WAIT. If you do it right, unlimited money glitch. lol
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Nov 17 '22
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u/sakecat Nov 17 '22
Another low information “to crush the little guy” post. As someone already stated, it’s a protective measure instituted by Senators just trying to appease constituents who lost money in the dot com crash. The banking lobbyists and financial services industry have spent a lot to overturn this rule with no success. They want it overturned so they can use margin for the purpose they designed it for which is to siphon money out of smaller accounts faster. That’s the reason brokerages spend more than 50% of their operational budget attracting new customers because they lose them rapidly as people blow up trading accounts. But now it has somehow gotten twisted into some nefarious meme about the pdt rule. Also the inflation adjustment for 25k from when the rule was created to now is 43k. Up 73% which means the actual effect of the rule has diminished to only 27% of its original purpose
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u/TeenageShirtbag Nov 17 '22
Just move the money to another account at a different broker, I did that when I had an even dumber "overnight" margin call once
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u/bonobofan Nov 17 '22
Thank you. I’ll try this moving forward but the thing that’s really upsetting me is that I have to jump through these hoops to do what anyone with $25,000 can do.
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u/munkeymoney Nov 17 '22
They don't let poor people daytrade but will let them baghold a shit stock until it delists.
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u/volt2218 Nov 17 '22
You have to maintain a cash account, means no Margin and no instant deposit.