It’s the end of an era.
For those of you who don’t know…
The Pattern Day Trader (PDT) Rule limits accounts under $25,000 to 3 day trades per 5-day period.
Finally, the SEC fully approved FINRA’s rule change. And the PDT rule is dead.
Right now, there is SO much opportunity in the market.
And there’s even more opportunity looming on the horizon.
But there’s one catch…
The rule change is coming up fast.
When the PDT rule goes away, volatility and liquidity are going to spike (and it could get wild)…
That’s why I want to make sure you’re ready.
Because you have three weeks to get your house in order.
PDT Rule Change Explained
Picture the millions of accounts…
$10K, $12K, $16K… Anybody under $25K.
Before this rule change, small accounts like these were capped at three “round trips” (buy and sell of the same security) every five trading days.
Break that rule, and you got locked out of day trading for 90 days (or until you deposited enough cash to hit the $25,000 threshold).
Ever sit on your hands while perfect setups flashed across your screens because you had already burned your three tickets for the week?
The opportunity was there, and you would’ve taken it. But the rulebook said no.
It was designed to protect retail traders from blowing themselves up with excessive leverage.
But in practice, it handcuffed disciplined traders while doing nothing to stop reckless ones from losing money.
But after this change takes effect?
All those traders are going to have the freedom to go in and out of trades as much as they want.
Which is why you want to learn as much as you can NOW … ahead of time.
The new intraday margin framework measures risk in real time (or end of day) instead of counting trades.
Your broker monitors your account for intraday margin deficits. If your risk exceeds your equity, you get a margin call just like any other margin violation.
But you don’t get locked out for 90 days just because you took four trades in a week.
The system requires you to maintain enough equity based on your actual exposure, not some arbitrary trade count.
It’s about how much risk you take, not how many trades you make … the way it should have been from the beginning.
How to Prepare
Here are a few key takeaways you should know before the rules change…
• Don’t be an idiot. Yes, the rule change gives you much more freedom. But that means you have to avoid overtrading.
• I don’t know exactly how big the influx of cash is going to be in three weeks. But it’s likely to be more towards low-priced stocks because that’s where small account traders lean.
• You need to talk to your broker. Contact them to find out when they are making the change. You might need to do some paperwork.
• After that, it comes down to … are you prepared?
• Focus on protecting your capital. You won’t have to “save” a day trade now. So, if you’re in a losing trade, cut losses quickly. There will be ZERO reason to hold and hope (ever again).
• You can gain a lot of experience very quickly when this change takes place. Use small positions and low or tight risk. Over, and over, and over again…
• The PDT rule was like a barrier to practice. So, when it gets lifted, consider every trade practice. It is NOT about making money at first. It’s about refining your process. If you keep that mindset, the PDT rule change will be the biggest gift ever.
Get Ready for a COVID-Like Market
Do you remember the COVID market? If you weren’t trading yet, it was CRAZY.
First, everyone was sitting at home with nothing to do.
Then, the stimulus checks came.
Somewhere between 10 million to 20 million people opened brokerage accounts and started trading.
What stocks do you think they bought the most?
Low-priced stocks. The same stocks that I trade.
The PDT rule change could create similar trading conditions
You have three weeks left to prepare for the PDT rule change.
This is the biggest change to trading in 25 years.
Prepare now to take advantage of it!
If you have any questions, email me at [email protected].
Cheers,
Tim SykesEditor, Tim Sykes Daily
