Pattern day trader

Do pattern day trading restrictions apply in the emini sp500 futures market or does it apply only to stocks?

I've never heard of "pattern day trading restrictions" and so I guess that they do not apply to the E-mini S&P500 future.

I am of the opinion that there are very few (or no) restrictions in the E-mini futures except for the obvious illegal ones and there is a size limit which 99.9% of traders are unaffected by. The size limit was 1,500 contracts at one point but I think that may have been lifted.

How do "pattern day trading restrictions" apply to stocks?

After a little further investigation I have discovered the following (which I previously did not know because I don't trade stocks):

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Pattern Day Traders Criteria and Restrictions

The NASD and NYSE, as part of a small investor protection agenda, instituted regulations intended to limit the amount of trading that can be done in accounts with small amounts of capital, specifically accounts with less than $25,000 equity.

Overview of Pattern Day Trading ("PDT"):

Day Trade: any trade pair where a position in a security (stock, bond or stock option) is increased ("opened") and decreased ("closed") within the same trading session.

Pattern Day Trader: someone who executes 4 or more Day Trades within a 5 business day period. A trader who executes more than 4 day trades in this time is deemed to be exhibiting a 'pattern' of day trading and is subject to the PDT restrictions.

In order to day trade, the account must have at least $25,000 in equity, where equity includes cash and stock, but does not include option or warrant value.

The NYSE regulations state that if an account with less than $25,000 is flagged as a day trading account, the account must be frozen to prevent additional trades for a period of 90 days.

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So I think that I can answer this question now. No restrictions like this on E-mini Futures. I have seen brokers advertising margins as low as $500 to day trade so theoretically you could trade the E-minis with as little as $500 in your account and there's no limit on how many times you trade per day - to my knowledge. (Most brokers have a minimum account open size between $5,000 and $10,000 so you wouldn't actually be able to open an account with $500.)

Hope that helps.

...and I've just read about a method that some brokers use to prevent your account from being frozen for 90 days which I think is very clever.

If the broker detects that you are about to execute your 4th day trade trade within the 5 day period then they will prevent you from executing this trade and by doing this will stop your account from being frozen.

Clever brokers!!!

Yes, Interactive Brokers works this way. You get a message when you will violate the PDT.

I was learning to daytrade stocks but my account is < $25000. So I started learning futures.

Be carefull: futures have a large leverage. Use good money management to handle your risk!

Day trading: What do you think is the practical maximum of contracts you can trade in the ER2, ES, YM? As stated, there is a limit but is it practical to trade 1000 contracts in one order?

quote:

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Originally posted by rverheyen

Day trading: What do you think is the practical maximum of contracts you can trade in the ER2, ES, YM? As stated, there is a limit but is it practical to trade 1000 contracts in one order?

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In the ES you can probably trade the maximum allowed by the CME (which I think is currently 1,500 or 3,000) without having a large (if any) impact. During normal operation the ES can handle a fantastically large volume. I have seen single orders of 1400 ES contracts go through the time and sales window. Most traders with large orders that trade at market will mask their orders by breaking them up into smaller odd lots. If you use a limit order then I don't believe that it is "as" necessary to mask your order to hide it.

The ER2 and YM are much thinner markets and so you would not be able to trade 1000 contracts in one hit on those markets. If the market was moving rapidly in one direction then you may be able to get 1000 contracts filled on a limit order (against the move) in the ER2 or YM because the traders taking the other side of the position against you will be arb'ing the positing against the cash.

I have just read the following on cme.com dated October 2004. Not sure if it still applies:
Orders of any quantity may be accepted for stock index futures and options on stock index futures for entry on the GLOBEX System. However, orders exceeding 400 futures contracts must be entered on the GLOBEX System as multiple entries each of which must not exceed 400 contracts.

My largest assumption, when extrapolating my trading account into the future, was trading with 200 contracts.

So that's not going to be problem.

If you're trading the ES then 200 can be considered (relatively) chicken feed and you have nothing to worry about. On YM and ER2 you need to consider that size.