Is $25k required for day trading?

[Shoe]

I am planning to dab around a bit with day trading, with small amounts. Not necasirly buying and selling several stocks per day, but more like buying a stock, and then selling it within 24 hours most of the time. I was reading at zecco.com that if you qualify as a daytrader (more than 3 "day trades" within 5 business days) you need account equity of $25,000, and they made it sound like this was required by the SEC. Is that true, or is that just a limit they have set at their site?

Also, I am thinking about starting off with a bang -- My first few buys with my initial investment I am planning to take out full margin, until I hit a winner, then I will start using margin more conservatively. If I happen to go broke on margin -- I would just reload with my next paycheck. Worth a shot or bad idea?

Also, since I am going to have a relatively small balance for now, should I just stick to Zecco with the free trades? If I was only buying/selling about $1,000 worth of a stock at a time, are the fees charged by sogo/scottrade, etc... too much to overcome? Thanks in advance!

[Evan]

[ QUOTE ]
Also, I am thinking about starting off with a bang

[/ QUOTE ]
You'd be a fool NOT to do this.

[plomahaaaa]

I looked at zecco, ended up going with scottrade. The extra benefits in terms website speed, ease, advise, ability to trade with PDA, etc make it worth $7 trade.

[RedJoker]

Yes, 25k is required. However if this is your first time day trading then expect to lose all of it.

Also realize that there are different tax implications for day trading. plomahaaaa said that scottrade charge $7 a trade, for a $1000 trade, you are paying 1.4% getting in and out. Can you overcome this?

[Shoe]

[ QUOTE ]
Yes, 25k is required. However if this is your first time day trading then expect to lose all of it.

Also realize that there are different tax implications for day trading. plomahaaaa said that scottrade charge $7 a trade, for a $1000 trade, you are paying 1.4% getting in and out. Can you overcome this?

[/ QUOTE ]

Are there any other special laws or other weird rules I need to know about ahead of time?

Requiring 25k seems like a weird law to me. I don't see why I can't just buy and sell however much I want to buy and sell whenever I want, as long as I am willing to pay the commision, and report it on my taxes. If I have 25k in my account can my individual day trades be as small as I want (such as $1,000 each)?

My understanding is that any gains would be taxed as ordinary income. But I will still only be paying on my net gains (profit) over the course of the year, correct?

Does anyone know of any good websites or books that you can recommend for someone new to daytrading?

Also, I do have a scottrade account but figure I would want to be doing atleast $5,000 - $10,000 per trade, preferably more, to make their commission more negligible. I'll probably start out at either zecco or sogoinvest.

Also, you said I should expect to go broke my first time daytrading -- any general tips or anything you can give to make this less likely to happen, or any reasons that most people end up going broke? I really don't think my portfolio would be going up or down more than a couple percentage points per day. Maybe I'd lose about 10% in a really bad day, not accounting for a huge market event such as a terrorist attack or something similar.

[Fishhead24]

I believe it is a great time to be DAY TRADING.........as the market has avoided any prolonged slump for 6-8 months and should continue throughout the 2007 trading year.

GL,

-FH-

[Chrisman886]

If you have less than 25k then the pattern daytrading regulation states that you cannot make more than 3 daytrades in a rolling five day period.

Just a word of advise ... if you are trying to daytrade with less than 25k, you might as well not bother. I think you should have a MINIMUM of 50k, and probably 100k. Plus, you need to know what you're doing too. If you are looking for a website that will give you the education you need to daytrade/swing trade and not just give you useless stock picks, pm me. Realize that you WILL lose money for your first year of trading and that it takes years of diligent, continual learning and experience in order to become a consistently profitable daytrader, let alone be a swing trader.

[RedJoker]

[ QUOTE ]
Are there any other special laws or other weird rules I need to know about ahead of time?

[/ QUOTE ]

Probably but I'm not a day trader, I just know a small few things. Maybe somebody more knowledgeable might chime in.

[ QUOTE ]
If I have 25k in my account can my individual day trades be as small as I want (such as $1,000 each)?

[/ QUOTE ]

yes.

[ QUOTE ]
My understanding is that any gains would be taxed as ordinary income. But I will still only be paying on my net gains (profit) over the course of the year, correct?

[/ QUOTE ]

I don't have much knowledge of American tax laws. Profits from day trading are treated as ordinary income, however if you were to invest that money for a longer period (> year I think) then you are charged capital gains, which is cheaper. This is just another obstacle you'll have to face when trying to beat the market.

Yes; net only.

[ QUOTE ]
Also, you said I should expect to go broke my first time daytrading -- any general tips or anything you can give to make this less likely to happen, or any reasons that most people end up going broke?

[/ QUOTE ]

This will be a learning experience, consider the money a tuition fee. People end up going broke because they pay huge amounts in commissions and if they do make money they pay more tax. There are probably lots of other reasons.

[ QUOTE ]
I really don't think my portfolio would be going up or down more than a couple percentage points per day.

[/ QUOTE ]

Depends what you're trading and what your strategy is.

I hope there are some day traders on this board who will respond and give a different point of view as I probably sound very negative without having any first hand experience myself.

[Shoe]

Thanks for the replies! [img]/images/graemlins/grin.gif[/img]

[mattb8818]

I was just wondering why you are expected to lose money the first year of day trading. Isn't your expected value in the market positive and therefore you should be expected to make money?
I don't know anything about it and am curious?