Tag: trading tricks

  • Is trading stocks without margin a better choice?

    Is trading stocks without margin a better choice?

    Is trading stocks without margin a better choice?
    Trading stocks with margin can help you increase profits, but it can also increase losses. You can end up losing even more than what you invested. 

    By Guy Avtalyon

    Before we analyze why trading stocks without margin could be a better idea for you, let’s see how you can trade without margin. I think it’s a proper way and order.

    Let me explain to you one important thing. Nothing is wrong with trading on margin, it can increase your profits, but you have to be a very disciplined and skilled trader if you want to do that. Margin trading can increase your losses if you misuse it or use it at the wrong time. For example, it’s completely wrong to trade on margin if you’re greed or desperate. Honestly, trading stocks without margin could be a better idea for you.

    What are your options for trading stocks without margin?

    Of course, if you’re a day trader or want to become that, margin trading might be the only choice. But even then, you can trade stocks without margin, and here are some tips on how to do that.

    It is allowed to have four trades per week (three trades per five days is the PDT rule), and you can still avoid the brokerage firm to tag you as a day trader. For example, if you have sufficient cash, you don’t need a margin. Meaning you don’t need to borrow money from your broker. You need to open several accounts, for example, four with a balance of $6,000. That will give you a chance to place 16 trades per week.

    For me, it’s absurd, but you might be able to maintain four accounts every day. In my opinion, it’s too many accounts to manage at the same time. But, who knows, maybe you’re capable of doing so. There are some other possibilities, but I wouldn’t waste your time on them as they are not working in reality. 

    What is essential in trading stocks without margin? 

    Keep in mind; you do not need to make it all in one day. Instead, think about trading stocks as a permanent and long-lasting job. Let me explain to you one idea. Let’s say you have a $25,000 account and want to use that cash for trading stocks? I can hear your question: Why should I trade $100,000 if I can use the full advantage of $400,000? How can I earn? 

    So, you may think it’s a stupid idea. Just read the rest of this post, and at the end of it, we’ll be on the same page.

    I want you to honestly ask yourself the question: Why do I want to earn quickly? No, you don’t need to tell me. Just be honest with yourself. Why is it so hard for you to recognize time as an advantage? Can you trade slower? Of course, you can!

    Trading with cash carries a lot of advantages.

    For example, it gives you a chance to become a moneymaker, and I’ll show you how to do that. You’ll become one of 10% elite traders.

    Without any doubt, trading stocks with a margin when the market is going against you is the most stressful situation. Let’s say you’re holding a long position on the stock with a 60% cash requirement. At the same time, you hold two more positions that also go against you.

    What are you going to do? Get panicked? Are you confident with your stop-loss orders? Will you stick with them? Are you going to follow and respect your strategy?

    If you’re trading for some time, you noticed the markets fall faster than they go higher. It’s fear. The fear can shift into a panic very fast. What could get you more pain in such circumstances is a margin. Your hard-earned profit could quickly vanish in minutes. Instead of holding a position, it’s much better to sell winning stocks and exit with profit. 

    Also, brokerages will never give you money for free; they will charge you interest. They are profiting from lending you cash. So, that’s the reason why they will always offer you to trade stocks with margin. What is best for you to do is to decline such an offer. If you’re honest enough, you will never find a reason to put yourself in a situation to pay interest and have more losses. 

    You’ll end up in debt. Instead, put some more effort into earning cash and trade stocks without margin.

    Can you trade stocks without margin?

    You can trade stocks without margin only if you have enough capital to open trades. In other words, you must have a sufficient deposit on your trading account. 

    Trading with margin can be dangerous for beginners. But the fact is that the PDT rule isn’t implemented in cash accounts. That’s the point. If you use your cash account, you can make as many trades as you want, but the catch is that it has to be settled cash. But it isn’t a problem necessarily. If you treat trading stocks as a long-term job and not a quick profit scheme, your cash account provides you a straightforward way to make money from your trades. Also, one of the advantages is that you don’t need to worry about PDT. Sounds fair enough.

    Trading tricks 

    If you don’t have $25,000 to trade stocks, you still have alternative trading strategies. I’ll be honest with you, and they are far from perfect. One is to have four trades per week instead of three trades in five days. Also, you can trade stock on the foreign markets. After you do some in-depth research, I’m sure you’ll find the differences and benefits. You’ll find the market that fits your trading needs.

    You might also choose swing trading to enter trades that you can hold for longer than one day. This way isn’t a classic trick, it’s more strategy, but it’s a good opportunity for the traders who can’t meet the $25,000 requirement. 

    Also, you can open more than one account with different brokers. You’ll trade small and produce smaller income, but you’ll have more trades and the possibility to earn practically more.

    Frankly, all these tricks are far better than the trading stock with margin.

    Let’s say you have $15,000 in your margin account, and you want to buy a stock that costs twice more than you currently have. Your broker is willing to give you a margin. After you buy stocks worth $30,000, you’ll own them, but also, you’ll owe your broker $15,000. You’ll make a profit if the stock price increases. Your profit would be bigger than if you bought stock with your money, that’s true. But if the price decreases, your loss would be more significant with margin trading than if you purchased stock with cash.

    Anyway, borrowing from brokers isn’t always straightforward; borrowing from brokers is as binding as banks.

    Can you see why trading stocks without margin is a better choice?

  • How to Increase the Number of Trades Per Day?

    How to Increase the Number of Trades Per Day?

    How to Increase the Number of Trades Per Day?
    Your strategy limits how often you day trade, overtrading can happen when you take more trades than your strategy allows.

    By Guy Avtalyon

    I heard so many times this question: How to increase the number of trades per day. I’ll tell you something that may surprise you. You don’t have to trade every day, not even every week. So how to make consistent gains? Actually, you can generate even better profits if you don’t trade frequently. For that to achieve you don’t need to manage numerous open positions and spend days in front of your computer. 

    Surely, you’re waiting for me to tell you about the special secret.

    If you stay long enough, you’ll see!

    Firstly, you can trade stocks on how often you want but in a non-margin account. Of course, you don’t have a non-margin account otherwise you wouldn’t ask this question. 

    So, you’ll have to trade under the rule known as  “pattern day trading rule”. What does it mean? The number of your trades is limited if you don’t use your cash account. On the other hand, if you use cash or a non-margin account you can trade as many times as you want. However, if you use a margin account it is allowed to trade three times every day for a five day period. If you are smart you can extend this number to four. For example, to avoid this rule you can buy the stock at the end of the trading day and sell it the day after. In this way, you’ll hold stock for less than one day but you’ll have more trades. 

    How often to trade stocks?

    This Day Trading Rule will limit you. Keep in mind that the number of trades means the number of transactions, not the number of different companies you trade. 

    The day trading rule operates by identifying some traders as “pattern day trader”. Such traders must have deposited $25,000 in their accounts. The good news is that you don’t need to cover this amount in cash only, you can use other securities also. But if you don’t use a margin account this rule cannot be applied to you. If you’re in cash, 

    you don’t need to comply with this rule, of course. 

    But, what is smart to do? What is the reasonable number of trades per day? How to increase the number of trades per day? First of all, if you have less than $25 000 the reasonable decision is not to use a margin account. In this way, you’ll reduce the risk. If you’re a beginner it is smart not to use leverage. Just take care that some mistakes can wipe you out completely and trading with leverage is one of them.

    However, it is a completely different situation if you have experience but not enough capital. If you want to avoid the day trading pattern rule you should do the following.

    Tricks on how to increase the number of trades per day and more often trade stocks

    Open added accounts. This is the easiest way. For example, you can open three different accounts to execute day trading. This strategy is one of the tricks actually. I already mentioned that the rule can limit the number of transactions per account. But if you have several accounts you can trade more often and you’ll not be flagged as a pattern day trader. You can make 15-days transactions from 15 different accounts.

    Well, the problem could be how to open multiple accounts in your name. Well, don’t do it. Open different accounts in the name of your family members, for example. It is completely legal for you and your family members to have trading accounts with the same broker. 

    Well, if you don’t trust your family, there is still a chance to open multiple accounts with different brokers. That’s how you can overcome the problem of “pattern day trading rule”.

    But be careful, this can’t last forever. It’s a matter of time when the brokers will start to control you. The consequences aren’t pleasant. They could increase the minimum collateral limit even if you use your cash account or other non-margin accounts. Their limitations can be tied to social security numbers or they can request to connect the biometric information for using these accounts.

    Therefore, if you want to be a daytrader and break the limited number of trades per day you’ll need to have some other tricks in the pocket.

    Trade in the markets outside your country

    The day trading pattern rule is required by American regulators like FINRA and the SEC. Hence, this obligation does not surely hold true in stock exchanges out of the US. You can look at some foreign markets and exchanges. Many of them don’t have such rigorous demands. Well, you can’t just jump into another market, you’ll need to examine it first. For example, things like taxes and legal issues, liquidity and risk matters, etc.

    So, you may find another way often to trade stocks when you want a day trade but your capital is below $25.000 which is required in the US. These that I presented you are just a few strategies on how to avoid pattern day trading rule.

    But frankly, this rule is helpful to both traders and brokers. It decreases the risk for both sides. 

    The pattern day trading rule appeals to traders that use a margin account and only on the territory of the US. If you trade out the US market you don’t need to respect this rule. Also, you don’t need to follow this rule if you’re a cash-based trader.

    How to increase the number of trades per day? I hope you got some clues now. Just, keep in mind any combination of selling, buying, or shorting a stock within one day can be recognized as day trading.

    Keep the balance in the number of trades

    Day trading is the most fascinating and queried trading style. In day trading you have to close all positions before the end of the trading day. The benefit is that you’ll avoid the overnight gaps. But is it a real benefit? No matter how day trading may look lucrative it has drawbacks too. Let’s ask the stats for help. The stats say that almost all returns in the stock market over the 20 years and more, come from overnight gaps. If you remove the risk and you don’t want to have a market gap against you, you’ll reduce the profit chances. Some traders wrongly believe that under-trading is better than overtrading. This is a mistaken opinion. If you have a winning strategy, then by bounding trades, you decrease your chances of success. Think about that.

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