Get ready, because for this episode, Stephen Johnson is taking the reins. The subject of discourse? Something that Stephen recently overcame: the Pattern Day Trader Rule
The PDT (the Pattern Day Trader rule) is a thorn in the side of many new traders. In the episode, Stephen will share his path to reaching a major trading milestone. Throughout the episode and interwoven with his personal story, he and co-host Tim Bohen will impart invaluable tips for how you, too, can overcome the PDT.
What is the PDT? While new traders will undoubtedly be all too familiar with the PDT, if you’re just in the research stages, you may not have heard the term yet. PDT stands for the Pattern Day Trader rule.
The PDT was originally put into place following the dot-com bubble; during this time, many people were day trading furiously, and when the bubble burst, many lost a lot of money. The governing bodies decided to set up certain limitations to protect traders with small accounts. What classifies as a “small account” is arguably quite large: if you have less than $25,000 in your account, you’re subject to various rules that limit how many trades can be executed and with what frequency.
Is the PDT a good thing? Yes and no. While Stephen seems staunchly against the PDT, Tim takes a gentler stance, noting that it is well-intentioned, but imperfect. In the episode, you’ll learn a little bit more about the specifics of the PDT, including the limitations and how sometimes they aren’t always a good thing.
How to party your way over the PDT. Are you ready for a dance party with Stephen? If you can power through his very frightening singing voice, you’ll learn a lot about how to break through the PDT barrier as a trader.
Stage 1: Getting started. To newbies, trading can seem like the wild west. Most traders are getting started with what Tim and Stephen (not the government) label a “small account”–anywhere from zero dollars to about $5,000. With an account like this, it’s very difficult to sell short, which can limit your range as a trader.
Tim and Stephen address important considerations as you build your fledgling account, including the “$2.50 rule” and margin calls. They also talk about ways to get around PDT rules, addressing the pros and cons of such tactics.
Stage 2: Moving forward. Welcome to the jungle! This is where traders go from $5,000 to $25,000. It might seem like a big range but really, this is where most traders are working. It’s within these ranges that you really start to spread your wings and see what you can do.
Tim and Stephen discuss how to strike balance with buying and selling as your account position increases. You may have a higher balance to short, but you still have necessary growth. This is when you really start to figure out the setups that work for you.
Ultimately, the lesson to be taken here is that to get ahead, you need to be a professional profit taker. As Tim says, you have to take the stance of “I take profits for a living. I don’t care if it’s 50, 20, or 200 bucks”. Both Tim and Stephen offer specific tips on how to grow your account with good, solid trades.
Stage 3: Party time! So, now that you’re standing atop the mountain that is the PDT…now what? Unfortunately, it doesn’t mean that you can just do whatever you want. Now, more than ever, it’s important to be careful and methodical in your trading. Once you feel invincible, that’s often when you make mistakes and the bottom falls out (along with your trading/PDT status).
In the episode, Tim and Stephen offer several practical tips for how to keep your cool and stay on track. Of course, they also offer some anecdotal tips for how they like to take a breather from the sometimes pressure-filled world of trading at a high level: while Tim likes to read a book or work, Stephen insists that “Alcohol and Tinder make me a better trader.” To each his own!
Thanks for tuning in to the new, serial format for the Steady Trade Podcast! Stay tuned for weekly episodes covering every aspect of how to be a steady trader with long-term, reliable success!
Did you love this episode? Be sure to leave an iTunes review!
You can use all you want overnight swing, but only 3 a week within the day…right? Haven’t heard a good explanation of if or how we can combine swing/ with 3 day trades PDT rule.
Worst episode ever. What a waste of time. This video is a joke..
For a min there I thought it was a scam vid.
Couldn’t get pass the first 5min. F..k
I’m out thanks but no thanks
Sorry you feel that way Soufou! What would you like to hear more of? We want to always be improving. Thanks!
Great job again guys! Tim I think your one statement here that sunk in was this.
“Your job is to take gains”
Tim Bohen,
I woke up with that thought in my mind today. Simple right?
Thanks Joe!
You guys are too funny!!! Oh, and Two Shay as well! Thanks. Some good advice here.
Hi guys, I always think you guys do a great job mixing in the serious messages with a bit of fun as well.
For myself who is about to start on my trading journey as much info and advice as possible is always great and you always mange to get the message across in a clear way with the humour thrown in for good value.
You may not remember me but I sent a message last week about the frustration of trying to find a US broker for opening up a small account. The Tim Sykes admin team came back to me with AllianceTrader which although is offshore apparently are pretty good. However I also got a message back from TradeStation who do take UK citizens and can also open up an account with as little as $1k.
So I have a decision to make to go with one or the other or maybe both but at least I know I can go ahead with my plans to start trading in March.
Do you guys have any advice about TradeStation? I looked online and they have received good reviews for executions which is all I really need as I will be registering to use the STT software this month 🙂
Many thanks for the great podcast again guys, always an enjoyable listen.
Mick
This was a tad interesting. I do appreciate the novelty on occasion and the neo trader that Steven represents in many of us. Thank you Tim for leveling it out. Always appreciate your rooting back to what works.
Thanks!
I’m dying of laughter! You guys rule!
Awesome, thanks for listening Simon!
Fun way to learn and always makes me laugh.
Great Job guys!
Looking forward to the next one.
THanks for listening Gary!
Hi Guys,
1 point I am a bit confused on. Tim you give a great breakdown on what you should do with a 0-500 account.
52 week highs
Trade that console high
Big gainers at market open
Spike early
Side ways through out the day
Over night trade (it is this part I am confused about, as you say not to trade at market open as it will use up my day trades, so are you saying buy in the evening as the trek shows a spike and then sell at market open.)
I am a bit confused, but this video has cleared so much up for me
Well obviously I’m a little biased, but STT is the best paper trading setup IMHO, we use real time data so its as real as it gets. We have a sale right now, check out: http://stockstotrade.com/presidents-day-sale/ and thanks for listening!
Great to hear Adam, in my opinion yes you should be focusing on stocks closing strong, since you are under the PDT its best to try and focus on overnight plays. Check out the podcast with Roland Wolf, he discusses this is what he did early on. Thanks for listening!
Great insites for under PDT rules account. I just find difficult to find the right stock to o/n, alot of times I get a gap down instead of a gap up, perhaps I am choosing the wrong stocks. Great podcast again. thank you 🙂
Yeah gappers are never guaranteed, but all you can do is put as many positives in your favor, putting together the “recipe” I call it, you can maximize your chance for success. Many traders will try and gap stocks with only 2-3 reasons, you need many factors in your favor or skip the trade. Thanks
I need a recipe….hehe…great input. Thank you Tim!
Thanks again for listening Clovis!
A little bit different but some good lessons. Humor is always good.
Thanks Guys
Yeah I agree this one was a little “different” for sure 🙂
Hey guys thanks for all the great motivation, inspiration, lessons, and entertainment! Question regarding the PDT.
Does it count as 1 day trade if I limit buy stock ABC and then make 4 separate limit sell orders in ABC in the same day? Or does this count as 4 day trades? Id like to make sure I understand this, for when capturing some profits when the trade goes my way. Thanks in advance!!!!