How to avoid Pattern trade rule

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Number of messages in the thread: 4

1. Date: 2007-10-20 14:51:35
Subject: How to avoid Pattern trade rule
From: "k...@g...com" <k...@g...com> Search message by this author

I use IB and due to pattern trade preventative formula they use, I
kept getting blocked for further new trades because my total portfolio
is less than $25000, sure I am small time investor but is there anyway
I can avoid this Pattern trade thing?

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2. Date: 2007-10-20 15:08:22
Subject: Re: How to avoid Pattern trade rule
From: "lubow" <l...@l...com> Search message by this author

(1) Do one daytrade per week.

(2) Borrow some money from mom and pop then prop up the account to at least
$100K.

(3) Get a job.

--
Lubow
<k...@g...com> wrote in message
news:1192891895.260125.249840@e9g2000prf.googlegroup
s.com...
>I use IB and due to pattern trade preventative formula they use, I
> kept getting blocked for further new trades because my total portfolio
> is less than $25000, sure I am small time investor but is there anyway
> I can avoid this Pattern trade thing?
>

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3. Date: 2007-10-20 16:00:35
Subject: Re: How to avoid Pattern trade rule
From: Mike <m...@l...localdomain> Search message by this author

On Sat, 20 Oct 2007 07:51:35 -0700, k...@g...com wrote:

> I use IB and due to pattern trade preventative formula they use, I kept
> getting blocked for further new trades because my total portfolio is
> less than $25000, sure I am small time investor but is there anyway I
> can avoid this Pattern trade thing?

"On February 27th, 2001, the Securities and Exchange Commission (SEC)
approved amendments to NASD Rule 2520. These amendments modify margin
requirements for individuals who actively daytrade stocks and become
effective on September 28th, 2001.

While the recent amendments largely focus on "Pattern Day Traders" (i.e.
active intra-day traders), we feel it is still very important for anyone
who trades the markets to review these changes.

Following are key points to keep in mind regarding this rule change:

1. Your broker and/or the NASD will consider you a "pattern daytrader"
if you buy and sell (or short and cover) any security on the same day in
a margin account AND you execute four (4) or more such trades during any
rolling five business day period (Saturday, Sunday and market holidays do
not impact the five day rolling period).

2. If, at any time, you execute four (4) or more such trades in a
rolling five day period, you'll then be required to maintain a minimum
equity of $25,000 in your margin account prior to any further day-trading
activities. This may also impact other investing in the account as well
(check with your broker).

3. At some brokerage firms, if you meet the "pattern daytrader"
requirements and maintain a margin account of at least $25,000 as
required, you will be extended buying power of up to four times your
maintenance margin excess. Keep in mind, however, that this buying power
is limited to intra-day trades only and you must be flat by the end of
the trading day or your account will close trading at 25% equity
(resulting in a house/margin call)."

http://www.daytraders.com/nasdaq_rule_2520.html

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4. Date: 2007-10-20 19:27:43
Subject: Re: How to avoid Pattern trade rule
From: "Ar Q" <A...@h...com> Search message by this author

<k...@g...com> wrote in message
news:1192891895.260125.249840@e9g2000prf.googlegroup
s.com...
> I use IB and due to pattern trade preventative formula they use, I
> kept getting blocked for further new trades because my total portfolio
> is less than $25000, sure I am small time investor but is there anyway
> I can avoid this Pattern trade thing?
>

Call your broker that you will never day trade again. They will remove you
from $25,000 restriction immediately. (But it is one time deal. If you
violate the rule again, no one can save you. See the rule next.) Then you
follow the non-daytrade rule by holding your stocks 3 days and options 1
day. For example,

If you bought GOOG shares on Monday, it is safe to sell them on Thursday.

If you bought GOOG options on Monday, it is safe to sell them the next day
(on Tuesday).

Basically, stocks take 3 days and options take 1 day to settle. If you
daytrade, you bought and sold stuff on the same day. It is no-no.