Day trade of stocks. How much to begin?

traderindie79 · Jan 25, 2016

Now I am considering doing day trade of stocks for a living, from home or with others. How much money should I prepare to begin? I don't really see this kind of information around. I think I have read somewhere, about $1000? So I tried just paper trade (trade without using money) for a while and I don't think beginning with $1000 is enough because you have to take commission fee into account.

So how much of money do you guys think is appropriate for day trade of stocks for a living?

dbphoenix · Jan 25, 2016

traderindie79 said:
Now I am considering doing day trade of stocks for a living, from home or with others. How much money should I prepare to begin? I don't really see this kind of information around. I think I have read somewhere, about $1000? So I tried just paper trade (trade without using money) for a while and I don't think beginning with $1000 is enough because you have to take commission fee into account.

So how much of money do you guys think is appropriate for day trade of stocks for a living?

Though some of your questions have unfortunately gone unanswered, you did receive some good advice in November. Have you taken any of it? Are you any farther along now than you were then?

As for "how much money should I prepare to begin", the answer is none. Based on what you've posted, you're nowhere near ready to begin. Only after thoroughly studying the market, not books, and beginning to understand why price advances and declines will you be in a position to start risking real money.

I suggest you read this post. It's short.

Db

hhiusa · Jan 28, 2016

traderindie79 said:
Now I am considering doing day trade of stocks for a living, from home or with others. How much money should I prepare to begin? I don't really see this kind of information around. I think I have read somewhere, about $1000? So I tried just paper trade (trade without using money) for a while and I don't think beginning with $1000 is enough because you have to take commission fee into account.

So how much of money do you guys think is appropriate for day trade of stocks for a living?

Looking for good information in a chat forum like this one is like asking your hair stylist for legal advice.

In the US, you are required to have $25,000 at all times with a maintenance margin of at least 25%. You are not likely to find decent information on this site. It would be more responsible of you to look at the FINRA website. Investopedia also has a decent simplified breakdown for most things.

http://www.finra.org/investors/day-trading-margin-requirements-know-rules

What is the minimum equity requirement for a pattern day trader? The minimum equity requirements on any day in which you trade is $25,000. The required $25,000 must be deposited in the account prior to any day-trading activities and must be maintained at all times.

Does the rule apply to day-trading options? Yes. The day-trading margin rule applies to day trading in any security, including options.

How was the $25,000 requirement determined? The credit arrangements for day-trading margin accounts involve two parties -- the brokerage firm processing the trades and the customer. The brokerage firm is the lender and the customer is the borrower. In determining whether the existing $2,000 minimum equity requirement was sufficient for the additional risks incurred with day trading, we obtained input from a number of brokerage firms, since these are the entities extending the credit. The majority of firms felt that in order to take on the increased intra-day risk associated with day trading, they wanted a $25,000 "cushion" in each account in which day trading occurred. In fact, firms are free to impose a higher equity requirement than the minimum specified in the rules, and many of them already had imposed a $25,000 requirement on day-trading accounts before the day-trading margin rules were revised.

Can I cross-guarantee my accounts to meet the minimum equity requirement? No, you can't use a cross-guarantee to meet any of the day-trading margin requirements. Each day-trading account is required to meet the minimum equity requirement independently, using only the financial resources available in the account.

What is my day-trading buying power under the rules? You can trade up to four times your maintenance margin excess as of the close of business of the previous day. It is important to note that your firm may impose a higher minimum equity requirement and/or may restrict your trading to less than four times the day trader's maintenance margin excess. You should contact your brokerage firm to obtain more information on whether it imposes more stringent margin requirements.

Would I still be considered a pattern day trader if I engage in four or more day trades in one week, then refrain from day trading the next week? In general, once your account has been coded as a pattern day trader, the firm will continue to regard you as a pattern day trader even if you do not day trade for a five-day period. This is because the firm will have a "reasonable belief" that you are a pattern day trader based on your prior trading activities. However, we understand that you may change your trading strategy. You should contact your firm if you have decided to reduce or cease your day trading activities to discuss the appropriate coding of your account.

Does this rule change apply to cash accounts? Day trading in a cash account is generally prohibited. Day trades can occur in a cash account only to the extent the trades do not violate the free-riding prohibition of Federal Reserve Board's Regulation T. In general, failing to pay for a security before you sell the security in a cash account violates the free-riding prohibition. If you free-ride, your broker is required to place a 90-day freeze on the account.

Day trade of stocks. How much to begin?

traderindie79

Newbie

dbphoenix

Guest Author

hhiusa

Senior member

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