I understand that the pattern day trading rule was originally enacted to primarily protect clearing firms from margin overuse/loss mitigation. However, I don’t think you will find many traders agreeing that it has helped to protect them from losses. I don’t think the government should be trying to protect people with blanket rules for some traders and freedom for other traders. Education is much better. Maybe traders should have to answer questions or resolve theoretical trading situations demonstrating their understanding of trading and its risks before being approved for margin trading.
Personally being subject to PDT rules, I haven’t found any benefit to the rule. It has forced me to develop other strategies to trade daily such as holding positions overnight. And this has raised more risk than any day trading I have done (in a cash account). Traders should have enough day trades to use at least one per trading day. I feel the rule needs modernizing as there is more capital available and more brokerages are participating. I believe most brokers do track day trades used/remaining and show it in the order forms in their trading software.
Since the U.S. is the only nation that imposes such limitations on some traders but not others, the most reasonable correction would be to remove the rule entirely. A compromise would be to lower the minimum equity requirement to $2,000 or $5,000 for unlimited day trading and raise the number of allowed day trades from 3 to 10 over 5 consecutive trading days for those under the minimum.
A more sensible risk mitigation protocol would be to concentrate on penalizing actual habitual high risk traders. Perhaps enacting a margin rule based on margin usage rather than limiting responsible traders that may not even use much or any margin. Also requiring brokers to only use margin when a trade actually requires it would also mitigate much of the risk as well.
The current limitations on pattern day trading has increased my loss risk as I might not be allowed to close a losing trade before the end of a day. It is highly recommended to completely remove the rule, or at the very least, relax the minimum requirements for unlimited day trading and increase the maximum number of day trades allowed. I know on websites such as reddit.com there are many questions and comments on how to avoid or even work around the PDT rule. I would say there are many more traders with smaller account sizes (under $25,000) today than 30 years ago that are trading in margin accounts, and that proper education and personal responsibility are the best way to mitigate trading risks.
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Kelly Akins Comment On Regulatory Notice 24-13
Hello,
I understand that the pattern day trading rule was originally enacted to primarily protect clearing firms from margin overuse/loss mitigation. However, I don’t think you will find many traders agreeing that it has helped to protect them from losses. I don’t think the government should be trying to protect people with blanket rules for some traders and freedom for other traders. Education is much better. Maybe traders should have to answer questions or resolve theoretical trading situations demonstrating their understanding of trading and its risks before being approved for margin trading.
Personally being subject to PDT rules, I haven’t found any benefit to the rule. It has forced me to develop other strategies to trade daily such as holding positions overnight. And this has raised more risk than any day trading I have done (in a cash account). Traders should have enough day trades to use at least one per trading day. I feel the rule needs modernizing as there is more capital available and more brokerages are participating. I believe most brokers do track day trades used/remaining and show it in the order forms in their trading software.
Since the U.S. is the only nation that imposes such limitations on some traders but not others, the most reasonable correction would be to remove the rule entirely. A compromise would be to lower the minimum equity requirement to $2,000 or $5,000 for unlimited day trading and raise the number of allowed day trades from 3 to 10 over 5 consecutive trading days for those under the minimum.
A more sensible risk mitigation protocol would be to concentrate on penalizing actual habitual high risk traders. Perhaps enacting a margin rule based on margin usage rather than limiting responsible traders that may not even use much or any margin. Also requiring brokers to only use margin when a trade actually requires it would also mitigate much of the risk as well.
The current limitations on pattern day trading has increased my loss risk as I might not be allowed to close a losing trade before the end of a day. It is highly recommended to completely remove the rule, or at the very least, relax the minimum requirements for unlimited day trading and increase the maximum number of day trades allowed. I know on websites such as reddit.com there are many questions and comments on how to avoid or even work around the PDT rule. I would say there are many more traders with smaller account sizes (under $25,000) today than 30 years ago that are trading in margin accounts, and that proper education and personal responsibility are the best way to mitigate trading risks.
Thank you,
Kelly Akins