In the United States, the legal minimum balance requirement for initial trading is $25,000. You need to keep your balance above the $25,000 level to continue trading. If at any time your balance falls below the legal minimum, you will be excluded from day trading. This is called the Pattern Day Trading (PDT) rule.
However, there are some caveats to this rule. For example, there are international intermediaries who can circumvent this rule. You may also be able to open multiple cash accounts, but your available daily trades will always be limited. Let’s discuss this rule in more depth.
WHAT IS A GOOD STARTING CAPITAL FOR DAY TRADING?
While you can start day trading with an initial balance of $25,000, you should start from a balance above the minimum threshold as your balance may fall below the minimum requirements after your initial trades. To give you some leeway and flexibility to execute different trading strategies, $30,000 might be decent capital to begin with.
You can risk $300
per trade and place stop-loss points comfortably at strategic levels with a balance of $30,000. The minimum lot size of most stocks is 100 stocks with a mint size of $0.01, meaning you can set stop-losses of up to $3 per share and trade even volatile stocks with ease.
Day traders are allowed to use leverage up to four times their account balance. You can open trades worth $120,000 ($30,000 x 4) if you take leverage equivalent to four times your account balance of $30,000.
However, you should remember that you should not risk more than 1% of your account balance excluding the leveraged amount. In addition, you should calculate the optimal trade size taking into account your stop-loss point and risk per trade because leverage can lose a significant amount of money if you are not careful.