Is this true if you make more then 4 day trades on stocks in 5 days or less you will be flagged as a day trader and need to have 25k in your account at all times. Is this true or am i not reading this right over at ameritrade? Why do i need to keep 25k in my account if i want to mess around trying to make small hits in the market.
Heres what was written at ameritrade. There was a message saying i made 2 day trades in less then 5 days. and then said why is this important, which i clicked on and this is the message:
What is a day trade/round trip?
A day trade occurs when you buy and sell (or sell and buy) the same stock or option position during the same trading day. A trading day includes all pre-market, normal trading hours, and extended session hours. Selling a position held overnight and reacquiring the position the following day is not considered a day trade.
FINRA provides that a pattern day trader is any account that executes four or more round-trip day trades within any rolling five-business-day period, provided the number of day trades represents at least 6% of the total trading activity during the same five-business-day period.
If you are flagged as a pattern day trader, you'll be subject to restrictions, including a minimum equity of $25,000 at the start of any day in which day trading occurs. Pattern day-trader accounts that fall below the $25,000 minimum equity requirement and day trading will be restricted to closing transactions only for 90 days, or until the equity is brought up to $25,000.
thanks
cd
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To remove first post, remove entire topic.
Is this true if you make more then 4 day trades on stocks in 5 days or less you will be flagged as a day trader and need to have 25k in your account at all times. Is this true or am i not reading this right over at ameritrade? Why do i need to keep 25k in my account if i want to mess around trying to make small hits in the market.
Heres what was written at ameritrade. There was a message saying i made 2 day trades in less then 5 days. and then said why is this important, which i clicked on and this is the message:
What is a day trade/round trip?
A day trade occurs when you buy and sell (or sell and buy) the same stock or option position during the same trading day. A trading day includes all pre-market, normal trading hours, and extended session hours. Selling a position held overnight and reacquiring the position the following day is not considered a day trade.
FINRA provides that a pattern day trader is any account that executes four or more round-trip day trades within any rolling five-business-day period, provided the number of day trades represents at least 6% of the total trading activity during the same five-business-day period.
If you are flagged as a pattern day trader, you'll be subject to restrictions, including a minimum equity of $25,000 at the start of any day in which day trading occurs. Pattern day-trader accounts that fall below the $25,000 minimum equity requirement and day trading will be restricted to closing transactions only for 90 days, or until the equity is brought up to $25,000.
They can restrict your account to settled funds only, meaning even in a margin account you cannot trade until trades have settled which is 3 days for stocks and one for options.
Thats what they are saying and they WILL enforce it.
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cd,
That sounds right to me.
They can restrict your account to settled funds only, meaning even in a margin account you cannot trade until trades have settled which is 3 days for stocks and one for options.
Thats what they are saying and they WILL enforce it.
Also am still kind of confused what exactly is the reson for this? Why cant i use a small amount of money and try to make a few bucks everyday. I could easily put 25k in my account but i dont want to have that kind of money there for me to risk. Its almost like they want traders to lose more money then they really want to.
Sort of like a sportsbook telling me i have to put 25k in my account or i cant bet games.
Really confused about this. I might as well just take my money out and buy cd's if i cant be allowed to trade stocks for small amounts.
Thanks for the help
cd
p.s.why if you try to day trade with less then 25k are you more likey to lose it? I would think if you had more money in your account, then you would lose more faster due to buying larger amounts of more expensive stocks.
also who is that guy in your avatar? Its driving me crazy because i have seen his face before and i cant remeber where.
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Wallstreet,
Does this only have to do with margin accounts?
Also am still kind of confused what exactly is the reson for this? Why cant i use a small amount of money and try to make a few bucks everyday. I could easily put 25k in my account but i dont want to have that kind of money there for me to risk. Its almost like they want traders to lose more money then they really want to.
Sort of like a sportsbook telling me i have to put 25k in my account or i cant bet games.
Really confused about this. I might as well just take my money out and buy cd's if i cant be allowed to trade stocks for small amounts.
Thanks for the help
cd
p.s.why if you try to day trade with less then 25k are you more likey to lose it? I would think if you had more money in your account, then you would lose more faster due to buying larger amounts of more expensive stocks.
also who is that guy in your avatar? Its driving me crazy because i have seen his face before and i cant remeber where.
Its the CEO of Dryships..I put it up initially because I knew nobody would know who it is.
I dont know if you can have an account without margin..lol
Here is some insight as to the rule-
When you buy stocks, it take 3 days to settle the trade, if you SELL the stock before settlement has occurred, you have in a sense borrowed money from Ameritrade to make the trade. It is OK to sell a stock you bought in a non-margin (cash) account and sell it immediately.
The issue comes when this happens..
You sell stock A and use those funds for ANOTHER purchase before settlement has occured..that is the problem.
If Ameritrade hasnt received funds for the sale to place into your account, you are again "borrowing" to make the second trade since the money hadnt settled until 3 days.
Even with a MARGIN account where settlement only takes one day, the rule came into place to reduce volitility from retail investors who were buying and selling and buying and selling and it was a big hassle trying to slow this unhealthy action in the market.
After the NAZ meltdown and tons of retail guys got crushed, the exchanges raised margin requirements and they put in this daytrading rule as to try and protect people from trading so much and grinding their accounts down and to decrease volatility.
You could always put in the 25k and not use it, then it isnt an issue anyway.
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cd,
Its the CEO of Dryships..I put it up initially because I knew nobody would know who it is.
I dont know if you can have an account without margin..lol
Here is some insight as to the rule-
When you buy stocks, it take 3 days to settle the trade, if you SELL the stock before settlement has occurred, you have in a sense borrowed money from Ameritrade to make the trade. It is OK to sell a stock you bought in a non-margin (cash) account and sell it immediately.
The issue comes when this happens..
You sell stock A and use those funds for ANOTHER purchase before settlement has occured..that is the problem.
If Ameritrade hasnt received funds for the sale to place into your account, you are again "borrowing" to make the second trade since the money hadnt settled until 3 days.
Even with a MARGIN account where settlement only takes one day, the rule came into place to reduce volitility from retail investors who were buying and selling and buying and selling and it was a big hassle trying to slow this unhealthy action in the market.
After the NAZ meltdown and tons of retail guys got crushed, the exchanges raised margin requirements and they put in this daytrading rule as to try and protect people from trading so much and grinding their accounts down and to decrease volatility.
You could always put in the 25k and not use it, then it isnt an issue anyway.
Thank you so much for the great explanation. So if i read this right, i have 2 choices. Dont trade on margin or just put 25k in my account. Would that be correct?
Thanks again
cd
p.s. I knew i saw that picture before, hes george economou. I saw pictures of him on forbes and in other magazines,
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Wallstreet,
Thank you so much for the great explanation. So if i read this right, i have 2 choices. Dont trade on margin or just put 25k in my account. Would that be correct?
Thanks again
cd
p.s. I knew i saw that picture before, hes george economou. I saw pictures of him on forbes and in other magazines,
Also correct about 25k, you can either keep the balance at 25k and avoid it OR just wait for settlement, or keep the details of the rule..meaning only a certain number of "round trips" during a rolling 5 day period..
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cd,
Correct about George.
Also correct about 25k, you can either keep the balance at 25k and avoid it OR just wait for settlement, or keep the details of the rule..meaning only a certain number of "round trips" during a rolling 5 day period..
Yeah, that's a legit rule. They look down on daytraders, as they feel it creates instability in the market. The 25K requirement reduces the amount of day traders in the market.
Have you looked into forex CD? Reason I ask, is if you like to trade in short spurts, Forex might be good to look into. I just started it myself with real cash, I like putting in an order, make a few bucks profit, and sell again all in the matter of a few hours, or sometimes, even less.
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Yeah, that's a legit rule. They look down on daytraders, as they feel it creates instability in the market. The 25K requirement reduces the amount of day traders in the market.
Have you looked into forex CD? Reason I ask, is if you like to trade in short spurts, Forex might be good to look into. I just started it myself with real cash, I like putting in an order, make a few bucks profit, and sell again all in the matter of a few hours, or sometimes, even less.
Yeah, that's a legit rule. They look down on daytraders, as they feel it creates instability in the market. The 25K requirement reduces the amount of day traders in the market.
Have you looked into forex CD? Reason I ask, is if you like to trade in short spurts, Forex might be good to look into. I just started it myself with real cash, I like putting in an order, make a few bucks profit, and sell again all in the matter of a few hours, or sometimes, even less.
I have only done limited reading about that. Can you make as many trades as you want there?
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Quote Originally Posted by icemantbi:
Yeah, that's a legit rule. They look down on daytraders, as they feel it creates instability in the market. The 25K requirement reduces the amount of day traders in the market.
Have you looked into forex CD? Reason I ask, is if you like to trade in short spurts, Forex might be good to look into. I just started it myself with real cash, I like putting in an order, make a few bucks profit, and sell again all in the matter of a few hours, or sometimes, even less.
I have only done limited reading about that. Can you make as many trades as you want there?
Also correct about 25k, you can either keep the balance at 25k and avoid it OR just wait for settlement, or keep the details of the rule..meaning only a certain number of "round trips" during a rolling 5 day period..
Wallstreet,
Forgot one other question. Why did they come up with the number 4? That seems like a real low number of trades to be allowed in 5 days time before they consider you a daytrader. I would think 2 trades a day would be reasonable and not really consider that day trading.
cd
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Quote Originally Posted by wallstreetcappers:
cd,
Correct about George.
Also correct about 25k, you can either keep the balance at 25k and avoid it OR just wait for settlement, or keep the details of the rule..meaning only a certain number of "round trips" during a rolling 5 day period..
Wallstreet,
Forgot one other question. Why did they come up with the number 4? That seems like a real low number of trades to be allowed in 5 days time before they consider you a daytrader. I would think 2 trades a day would be reasonable and not really consider that day trading.
You can make as many trades as you want (as long as you have enough margin of course) Because the Forex market is completely liquid (as you are trading currencies), nothing needs to be settled. Any pair can be bought and sold at any time. And it's similar to day trading in that your goal is to buy low, sell high (or vice versa if you are shorting). Charts are very similar to stock charts, but they can get extremely volatile at times. But I've seen trades go up 50 pips in less than 10 minutes, 50 pips in a standard account = $500 profit. The only downside is leverage, a standard account is 100:1, so if a trade goes against you, watch out. But you can set stop losses to limit the amount you lose.
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You can make as many trades as you want (as long as you have enough margin of course) Because the Forex market is completely liquid (as you are trading currencies), nothing needs to be settled. Any pair can be bought and sold at any time. And it's similar to day trading in that your goal is to buy low, sell high (or vice versa if you are shorting). Charts are very similar to stock charts, but they can get extremely volatile at times. But I've seen trades go up 50 pips in less than 10 minutes, 50 pips in a standard account = $500 profit. The only downside is leverage, a standard account is 100:1, so if a trade goes against you, watch out. But you can set stop losses to limit the amount you lose.
Thats four ROUND TRIPS, so a buy,sell and a buy,sell and a buy, sell and a buy,sell. Four total open/close trades on the same stock.
I am not sure how the firms decided on this number, but that isnt Ameritrade alone, thats pretty much standard as I recall from the years in the markets.
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cd,
Thats four ROUND TRIPS, so a buy,sell and a buy,sell and a buy, sell and a buy,sell. Four total open/close trades on the same stock.
I am not sure how the firms decided on this number, but that isnt Ameritrade alone, thats pretty much standard as I recall from the years in the markets.
Thats four ROUND TRIPS, so a buy,sell and a buy,sell and a buy, sell and a buy,sell. Four total open/close trades on the same stock.
I am not sure how the firms decided on this number, but that isnt Ameritrade alone, thats pretty much standard as I recall from the years in the markets.
Man these rules suck, cant even do 1 trade a day with them. The system just hates the little guy
cd
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Quote Originally Posted by wallstreetcappers:
cd,
Thats four ROUND TRIPS, so a buy,sell and a buy,sell and a buy, sell and a buy,sell. Four total open/close trades on the same stock.
I am not sure how the firms decided on this number, but that isnt Ameritrade alone, thats pretty much standard as I recall from the years in the markets.
Man these rules suck, cant even do 1 trade a day with them. The system just hates the little guy
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