Like beginning any other company and career, to start day trading you need a few crucial tools and platforms. You require a broker and an order execution platform. These are tools you will surely need for yourself.
As stated in our prior articles, you will also require a stock scanner to identify your watchlist and check for possible real-time setups. You may not need a scanner however if you are part of a trading community.
You need a direct broker for day trading. You don't simply need a decent broker; you need an exceptional broker. Your trading vehicle is your broker. It doesn't matter whether you trade correctly or accurately; if your broker doesn't fulfill your order on time or at a reasonable price, you lose money.
Numerous brokers exist, each with its own unique set of tools and pricing models. It's easy to find excellent things that aren't cheap. It's also easy to find horrible things that aren't cheap. This book is too short to go into detail about all of them, but you can find more information on my website about brokers and how to pick the best one for you. That information may be found on my website, so please do so. I will, however, reveal the broker I use and why in this post. But before we go into it, I'd want to explain the PDT rule.
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A trader's ability to conduct transactions is limited if they are undercapitalized by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Any individual who day trades (buys, sells, or sells short, then buys, the same securities on the same day) four or more times in five business days is considered a "pattern day trader" under the regulations.
On any given day, a pattern day trader must have at least $25,000 in their account. Prior to engaging in any day trading, the account holder must have a certain amount of equity in their account. The pattern day trader will not be allowed to day trade again if their account falls below the $25,000 minimum equity threshold.
Since brokers charge exorbitant fees and charges to beginning traders with less than $25,000 in their account balances, many of these traders see the limitation as a hindrance rather than a benefit. Instead of working against them, it was put in place to safeguard merchants.
To qualify as "pattern day trader," certain broker-dealers may adopt a somewhat more expansive definition of the word than the one outlined above. Contact your broker to find out whether your trading activity qualifies you as a "pattern day trader," or PDT.
A good rule of thumb for traders who use offshore brokers is to make frequent withdrawals and to consider opening an account with a U.S. broker if they can expand their account size enough to comply with the PDT requirements in the future.
Similar PDT regulations may be implemented by other nations and authorities for their citizens. Ask your broker about the minimal criteria for day trading in your jurisdiction if you're a newbie.