Trading Regulations and Account Management
🏛️The Pattern Day Trader (PDT) rule, enacted on Feb 27, 2001, requires a $25,000 minimum for US margin accounts executing 4+ trades in 5 days, applying 4x leverage.
💼Professional trader status affects market data fees, with professionals paying more, while platforms like Robin Hood and ThinkOrSwim don't charge non-professionals.
🌴Traders avoiding PDT opened accounts with offshore brokers in Bahamas/Caribbean, offering 6x leverage but higher fees, no deposit insurance, and potential tax issues for US residents.
Trading Strategies and Restrictions
🔄T1 settlement allows daily trading of full account balance in cash accounts without leverage, increasing viability for small accounts.
🚫Short sale restrictions activate when a stock drops 10% from previous day's close, allowing shorts only on upticks to prevent flash crashes and naked short selling.
📊Circuit breaker halts stop stocks rising 10% in 5 minutes for 5 minutes, with tighter bands for lower-priced stocks and doubled halt sizes from 9:35-4:00 PM.
Tax Considerations and Retirement Accounts
💰Mark to Market accounting (IRS form 3115) exempts traders from wash sales, changing tax status prospectively if filed by April 15th.
🏦Retirement accounts like Roth IRAs offer tax-free trading without wash sales, PDT rules, leverage, margin, or short selling, providing government incentives for retirement savings.