Day Trading Margin Requirements: Know the Rules - Page 6

Kinda a catch 22..... in margin accounts funds settle faster but you can't day trade (unless account size over 25,000...something like that) in cash account you can daytrade as much as you want with available cash - but 3 day wait for funds to settle....

one way around this is day trade in cash account with options...options settle next day

alright now i have to send in my signature card and we are sent ToS FTW.

so ToS i can day trade. because its margin account by default. so i have 40k i can trade in one day 100times right? haha correct me if im wrong. im just being stupid.

I have a question for you guys. I just received the following day trade margin call from Zecco:

What exactly does this mean? I don't think I've traded on margin at all, and I've been sure to avoid going over 3 day trades every 5 business days.

ToS has bad customer service

i really think tradeking has the best. but i dont appericate that tradeking didnt allow me to upgrade my account to a margin. Oh well

alright i finally have my account transfer done. why does it say i have 3 daytrades left? should i call to get a margin account.

Believe it or not, I just read through most of this thread. I only skimmed the options parts.

In several people's comments, it was mentioned that with a cash account, the funds don't settle for 3 days after the sale of the stock.

With a cash account in Ameritrade, (and I don't know of how the other brokers work), the funds are settled 3 days after the buy side of the trade. In other words, if I buy a stock on Monday, and I sell it on Thursday, the funds from the sale are immediately available, and not subject to any penalties like under Regulation T.

The unsettled funds are available instantly to purchase with, but you must wait 3 days until the sale is settled-- Buy with settled cash Monday sell Monday afternoon-- any proceeds from that sell can be used immediately but you cannot sell with those funds until 3 days later. I got 2 free rides from my broker when it was a cash account- they told me on the third I'd be restricted to only buying with settled funds- I'm now margin and if I get a daytrade violation I will be cut back to a cash account.. It taught me to keep better records of my trades- I keep it on a calendar now and its a LOT easier to keep up with. I also keep a ledger with all trades showing daily/swing trades including profit/loss along with a daily printout of my account and have a monthly file. It made easier to keep up with..

Incorrect. Trades take 3 days to settle on both the buy and the sell side. Doesn't matter what broker it is...they have to follow the same rules. A buy is a single transaction that takes 3 days to settle. Selling that same stock is another transaction that takes 3 more days to settle.

Newmny has it right. You can buy with unsettled funds, but you have to wait until they settle before selling or you trigger a free-ride violation.

Interesting. I've had this same cash account for almost 2 years now and have never triggered a free-ride violation. I trade in and out of stocks some weeks 10 to 15 times per week. Although I rarely daytrade. Plus I have 55K in my account right now.

I only trade with money that says "available funds for trading".

Either, because I have that much funds in my account, and I generally stay in a trade for an average of 2 to 3 days, the funds could be cycling enough to keep me out of trouble.

Or, Ameritrade keeps track and doesn't make funds available without covering both sides of the trade.

I thought I had this understood until I started reading this and another related thread in this section.

Thanks.

Your answer is probably a combination of these. ^^

I was forced into a cash account for 90 days because of a PDT violation. I made 2 separate buys of the same stock and sold them all in one sell, thinking that was one roundtrip. Scottrade hit me with a PDT and I had to take the margin off my account for 90 days. I followed the advice here of calling my branch and talking with the manager to try to get by with a warning because it was my 1st time...he just flat out said branch managers have no discretion in the matter, rules are rules and it is my responsibility to know them. After 90 days, they automatically added the margin to my account.

So while I was in a cash account I had to be very careful of the timing. I would make several trades a week, but just made sure I always held them for 3 days. It improved my stock picking because it forced me to have to research stocks until I was confident holding them for 3 days.

I must admit, I'm still a bit foggy on this. Hate to admit it, but I need to understand this.

On one hand, I've read that with a cash account, you can daytrade as much as you want, as long as you trade with settled funds.

Now, I read this definition of Free Riding, and I'm copying this directly from Wikopedia.

In a cash account, you must pay for the purchase of a stock before you can sell it. If you buy and sell a stock before paying for it, you are free riding.

So, how can you buy and sell the same stock in one day, and be using settled funds? There is obviously something I'm not seeing here.

In the next part on Free Riding in Wikopedia, it says; If someone is trading rapidly and using all the cash available in the account to buy and sell, that person will likely get a freeriding violation.

That definitely describes me.

If you just have a cash account, and you buy 2500 shares of BAC with settled funds, you can turn around and sell it a minute later; however, if you then turn around and immediately buy shares of C with those proceeds, you have to hold C for 3 +1 before you sell as you bought C with unsettled funds.

Once you make a transaction, they no longer are settled funds.

Not sure if that makes sense.

Thats got it covered.. Since you have more than 25k it may work better for you to go margin- unlimited day trades and margin power.

I'm pretty sure that's the way it works.

Thanks. That does make sense.

For one thing, lets say I did just buy 2,500 shares of BAC, then turned around and sold them one minute later. Ameritrade wouldn't allow me to use those funds to buy C anyway. I would show no available funds for trading. So I'd say Ameritrade has it covered.

I've been thinking about going with a margin account for a while to make funds available quicker. With all the reading I've been doing I understand it better.

I definitely don't want to go to a margin account without thoroughly understanding it. The consequences for my ignorance could be a lot worse with a margins account.

Thanks to everyone who replied. Much appreciated.