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If you choose to take the next step, then you need to decide what type of account is best for you. Retail, Prop or CAP. These choices can sometimes be confusing, so I broke them down into simple descriptions below.

RETAIL ACCOUNTS

These are the ones you see on TV: ETRADE, TD Ameritrade, Scottrade and more. There is nothing inherently wrong with them, except that they require a minimum of $30,000 to intra-day trade, usually charge more for trading commissions and they don’t offer very good leverage, typically 4:1 intra-day and 2:1 overnight.

PROP ACCOUNTS

As mentioned above in order to take an ‘unlimited’ number of trades you have to have at least $25,000 in an account, usually more, because if you go below $25,000 you can no longer take unlimited trades. This is called the “Pattern Day Trading Rule or PDT” and it is a government mandate, not an individual company thing. These types of ‘retail’ accounts usually allow 4:1 leverage intra-day and 2:1 leverage overnight. Despite these stipulations, there are many ways to get around this rule, and start day trading with much less money. They include, but are not limited to Prop Accounts and Corporate Accounts.

Prop accounts will allow you to trade with as little as $3,000, and typically offer 10:1 and even 20:1 leverage which is good, however, in order to get these benefits you have to pass a series 56 test, provide access to all of your outside investment accounts and they lock your initial deposit for 1 year.

Benefits:

• Low cost of opening an account
• Impressive leverage
• Daily maximum drawdown is controlled
• Can get commission rebates
• Multiple platforms to choose from

Drawbacks:

• Ca ot hold stocks overnight
• Must pass a Series 56 or Series 7 test
• Have yearly mandatory FINRA continuing education (rules and regulations education)
• 1 year lock period on your initial deposit
• Must list outside brokerage accounts (and pay a fee to do so)
• Can only withdrawal your profits once a month

CORPORATE ACCOUNT

Corporate accounts are similar to a prop account, however there are a lot less restrictions. The entry price is roughly $3,000, leverage is usually 10:1 and up to 30:1. However, where they are vastly different is in their

Benefits:

• Low cost of opening an account
• Impressive leverage
• Daily maximum drawdown is controlled
• Can get commission rebates
• NO Series 56 or Series 7 required
• NO 1 year lock period
• They typically offer education
• Don’t have to list outside accounts
• Multiple platforms to choose from

Drawbacks:

• Ca ot hold overnight

The chart below does a good job of showing the differences between each account. Trading fees and costs can really add up, so it is important to make sure you have a clear understanding of what each company/brokerage charges for monthly platform fees as well as individual trading commissions. Most companies are only concerned with how much you can generate in commissions for them, thus they don’t offer educational packages and their customer support is sometimes lacking. It’s usually best to talk to experienced traders and get their opinion on which platform is right for you.