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the 25k min for most trading accounts; workarounds?

post #1 of 19
Thread Starter 
I've missed out on numerous trade ideas (options, shorts, FX) which would have paid off handsomely last year, all because I don't have the 25k min requirement needed to trade anything other than long buys.

Basically, if you don't have 25k tied up in your account you don't get to play the game--you're locked out. Is there any way around this rule? Possibly by going through a normal brick-and-mortar brokerage as opposed to an online brokerage?

Do overseas trading houses have such draconian rules? There must to be a way around this, it's maddening.
post #2 of 19
puzzled.gif Which country do you live in? Here in US there is no such limitations for shorting or options trading.
post #3 of 19
US rules, pattern day traders need 25k in their accounts otherwise they can't trade, if you are on margin

Honestly with <25k I don't see how one could successfully day trade. The retail broker commissions would be a killer
post #4 of 19
Quote:
Originally Posted by CYstyle View Post

US rules, pattern day traders need 25k in their accounts otherwise they can't trade, if you are on margin
Honestly with <25k I don't see how one could successfully day trade. The retail broker commissions would be a killer

Ok that makes more sense. I have no issues shorting or trading options regardless of my balance.
post #5 of 19
There are outlets for the retail investors to trade. There are loads of online brokers that offer trading accounts that allows you to even trade with mini contracts. Brokerages such as, FxPrimus, IGmarkets, Interactive Brokers etc do not require 25k.

They even offer you high leverage. So I don't get you at all.
post #6 of 19
I would warn away anyone without at least 50K in capital who plans on day trading, trading derivatives or short selling on a margin.

You do not have the necessary liquidity from various streams of income/cash to maintain solvent in the face of adverse movements from noise traders.
post #7 of 19
Quote:
Originally Posted by Nereis View Post

I would warn away anyone without at least 50K in capital who plans on day trading, trading derivatives or short selling on a margin.
You do not have the necessary liquidity from various streams of income/cash to maintain solvent in the face of adverse movements from noise traders.

Shorting is just the opposite of going long. There is no difference if you take long positions on a margin or short positions on a margin your risk exposure is still the same.

I agree in that day trading should be avoided until you have sufficient experience. Also derivatives trading should only be attempted if you fully understand the product.

However none of them have any relation to your amount of capital. You are the GUN and capital are your BULLETS. It is up to you on how to manage and fully utilize your limited amount of bullets to get as many kills as you can. You can be profitable in anything regardless of your amount of capital as long as you have a good strategy, risk management and state of mind.

The people who go bust from margin are losers who don't know how to manage their risk. Margin is a wonderful tool of maximizing your gains and it doesn't matter how much you leverage, it can be 100:1 or 200:1 you can manage your risk amount per trade to any amount you desire by just placing.....VOILA! A STOP LOSS.
post #8 of 19
Quote:
Originally Posted by Verniza View Post

Shorting is just the opposite of going long. There is no difference if you take long positions on a margin or short positions on a margin your risk exposure is still the same.
I agree in that day trading should be avoided until you have sufficient experience. Also derivatives trading should only be attempted if you fully understand the product.
However none of them have any relation to your amount of capital. You are the GUN and capital are your BULLETS. It is up to you on how to manage and fully utilize your limited amount of bullets to get as many kills as you can. You can be profitable in anything regardless of your amount of capital as long as you have a good strategy, risk management and state of mind.
The people who go bust from margin are losers who don't know how to manage their risk. Margin is a wonderful tool of maximizing your gains and it doesn't matter how much you leverage, it can be 100:1 or 200:1 you can manage your risk amount per trade to any amount you desire by just placing.....VOILA! A STOP LOSS.

It's the existence of the stop loss that will kill you if you're short selling something.

Traders have been known to submit large buy orders just to short squeeze the unsophisticated. In fact, there are algorithmic strategies built around taking advantage of short interest in addition to momentum trading strategies. These are typically large hedge funds who have direct market access and as such will always outspeed us.

The only securities where long and short positions are always just diametrically opposite sides of the same trade fundamentally are futures and vanilla european options.
post #9 of 19
Quote:
Originally Posted by Nereis View Post

It's the existence of the stop loss that will kill you if you're short selling something.
Traders have been known to submit large buy orders just to short squeeze the unsophisticated. In fact, there are algorithmic strategies built around taking advantage of short interest in addition to momentum trading strategies. These are typically large hedge funds who have direct market access and as such will always outspeed us.
The only securities where long and short positions are always just diametrically opposite sides of the same trade fundamentally are futures and vanilla european options.


That same logic will apply to people taking long positions as well. So according to you, you may as well lay off trading because hedge funds or market making brokers will hunt your stop loss whether or not you long/short.


This so called "stop loss hunting" occurs everywhere whether you are trading with a market maker or ECN or interbank market. The only difference is who the market movers are. All you need to do is be smart about it and know how to time your entry. You also need to manage your risk capital per trade. The so called "stop loss hunting" can be overcome with proper risk management. Don't put the blame of your losses to market movers instead learn to adapt to it and time your entries.


I've never had any problems shorting currency pairs. Sometimes major slippage may occur and hit my stop loss but with proper strategy and risk management it feels more like an ant bite rather than a smack to the face.
post #10 of 19
Quote:
Originally Posted by Verniza View Post

That same logic will apply to people taking long positions as well. So according to you, you may as well lay off trading because hedge funds or market making brokers will hunt your stop loss whether or not you long/short.
This so called "stop loss hunting" occurs everywhere whether you are trading with a market maker or ECN or interbank market. The only difference is who the market movers are. All you need to do is be smart about it and know how to time your entry. You also need to manage your risk capital per trade. The so called "stop loss hunting" can be overcome with proper risk management. Don't put the blame of your losses to market movers instead learn to adapt to it and time your entries.
I've never had any problems shorting currency pairs. Sometimes major slippage may occur and hit my stop loss but with proper strategy and risk management it feels more like an ant bite rather than a smack to the face.

Actually, I'd hope that if you're taking a long position that your fundamental valuation is so sound that it allows you to double up and buy more of the security if the security is falling in price. That cannot be said for short selling, where costs of borrowing can be high and positions closed out prematurely as a result. Hence, why I'd never recommend short selling to anyone who isn't already sophisticated enough to have 50K of capital to cushion losses. The mere case of shorting a stock and not having enough liquidity to double down and not worry about hitting your stop loss will open you up to being squeezed.

But from what I gather, you're a technical analysis guy who day trades. I'm a fundamentalist and do not use stop loss orders as my delta, beta and commodity exposure can simply be managed with derivatives. I also only close out my trades when the metrics I've valued the security on have changed materially.

Do remember that the vast majority of traders will crash and burn spectacularly and not even the big players are immune. The hedge fund industry last year had abysmal returns and almost all investment banks worldwide have shut down their proprietary trading desks regardless of where they operate.

When volatility is the order of the day, leverage is not your friend.

I'm curious as to what you mean by proper risk management, as I doubt anyone with less than enough to pay down a mortgage is sophisticated enough to understand what hedging is and how to not to lose their savings. Honestly speaking, I've seen too many people with little in their accounts get burned far too often to recommend anyone trade unless they've done it professionally or have the net worth to absorb the losses when they occur.
post #11 of 19
Quote:
Originally Posted by Nereis View Post

Actually, I'd hope that if you're taking a long position that your fundamental valuation is so sound that it allows you to double up and buy more of the security if the security is falling in price. That cannot be said for short selling, where costs of borrowing can be high and positions closed out prematurely as a result. Hence, why I'd never recommend short selling to anyone who isn't already sophisticated enough to have 50K of capital to cushion losses. The mere case of shorting a stock and not having enough liquidity to double down and not worry about hitting your stop loss will open you up to being squeezed.
But from what I gather, you're a technical analysis guy who day trades. I'm a fundamentalist and do not use stop loss orders as my delta, beta and commodity exposure can simply be managed with derivatives. I also only close out my trades when the metrics I've valued the security on have changed materially.
Do remember that the vast majority of traders will crash and burn spectacularly and not even the big players are immune. The hedge fund industry last year had abysmal returns and almost all investment banks worldwide have shut down their proprietary trading desks regardless of where they operate.
When volatility is the order of the day, leverage is not your friend.
I'm curious as to what you mean by proper risk management, as I doubt anyone with less than enough to pay down a mortgage is sophisticated enough to understand what hedging is and how to not to lose their savings. Honestly speaking, I've seen too many people with little in their accounts get burned far too often to recommend anyone trade unless they've done it professionally or have the net worth to absorb the losses when they occur.


Ah I see why our views differ now. You trade stocks while I do currencies. For stocks as there is a set market cap for individual stocks, the price is more liable to plays by big players. I do currencies which has little to no market cap so it requires an insane amount of capital to be able to move the market in your favor.


Actually on the contrary, I am more of a fundamental trader who utilizes technical charts to refine my entry prices. The stock market and FX market are very different. There is no proper method of gauging the beta of currency pairs. For FX risk management I employ, is mainly calculating your stop loss for the % of capital within my risk tolerance after factoring in leverage and risk-to-reward ratios. Of course there are ways to hedge certain currency pairs as there is correlation between some pairs and commodities. However, that is a step I avoid as hedging usually eats into my profits and I find proper money management more than compensates for my lack of hedging.


For me, I am still young(20) and have much to learn but my game plan thus far have provided me with good returns.
post #12 of 19
Thread Starter 
Signing up for options accounts, for instance, they require you to list net worth, income, etc... it's a bewildering form because it will get rejected if not meeting a certain threshold (which they will not tell you). Anyone know what the thresholds are?

And by the way, margin accounts are required for trading shorts and using options. Which I find stupid as I have no interest or intention with trading on margin.
post #13 of 19
Edit

Nothing to gain.
post #14 of 19
Quote:
Originally Posted by Satorialist View Post

I've missed out on numerous trade ideas (options, shorts, FX) which would have paid off handsomely last year, all because I don't have the 25k min requirement needed to trade anything other than long buys.

This a pretty results-oriented.
post #15 of 19
Quote:
Originally Posted by Nereis View Post

I would warn away anyone without at least 50K in capital who plans on day trading, trading derivatives or short selling on a margin.
You do not have the necessary liquidity from various streams of income/cash to maintain solvent in the face of adverse movements from noise traders.

+1
Quote:
Originally Posted by Satorialist View Post

I've missed out on numerous trade ideas (options, shorts, FX) which would have paid off handsomely last year, all because I don't have the 25k min requirement needed to trade anything other than long buys.
Basically, if you don't have 25k tied up in your account you don't get to play the game--you're locked out. Is there any way around this rule? Possibly by going through a normal brick-and-mortar brokerage as opposed to an online brokerage?
Do overseas trading houses have such draconian rules? There must to be a way around this, it's maddening.

facepalm.gif

You probably only remember the stuff you would have made money on. Plenty you probably would have lost money on. And Interactive Brokers is 10k, even less for students.
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